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Family Dollar fields buyout offer

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MATTHEWS, N.C. — Family Dollar Stores Inc. is the latest mass market retailer to receive an acquisition proposal.

Family Dollar Stores Inc. is the latest mass market retailer to receive an acquisition proposal.

The 6,800-unit dollar store chain has received an unsolicited conditional proposal from investor Nelson Peltz’s Trian Group to acquire the chain for a price between $55 and $60 per share, or as much as $7.6 billion in cash.

Trian Group already holds a 7.9% stake in Family Dollar, which has engaged Morgan Stanley & Co. as its financial advisor.

On the day the proposal was announced Family Dollar’s share price had soared 21.8% to $53.54 per share. In addition, the announcement, which represented a 36% premium over Family Dollar’s share price the day before Trian Group made its offer, lifted the share price of other small-box discount retailers, including Dollar General Corp., Dollar Tree Inc. and Fred’s Inc.

Some analysts have suggested that Trian Group’s offer could trigger competing bids from other private equity players.

Other analysts, however, have wondered if Trian Group could assemble the equity and debt to finance a $7 billion leveraged buyout and speculate that the firm might be looking to recoup losses suffered since it took a stake in Family Dollar last year.

Prior to the offer Family Dollar’s stock had lost more than 11% of its value since the start of the year, falling 8.8% on January 5 when executives announced that same-store sales growth had slowed to 4% and predicted slower growth for the rest of the year.

The bid to acquire Family Dollar came after announcements that BJ’s Wholesale Club Inc. was exploring a possible sale and reports that Big Lots Inc., the nation’s largest closeout retailer, was considering a buyout.

Meanwhile, a law firm in New York has begun looking at the possibility that Family Dollar would breach its fiduciary duties if it did not entertain offers besides the one made by Trian Group.

Attorneys at Levi & Korsinsky say that at least one analyst has set a $63-a-share target for Dollar General’s stock, well above Trian Group’s $55 to $60 offer.


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