Oh how I love buying everything for just $1!
Huffington Post reports that Dollar Tree will be buying competiting discount store, Family Dollar in a cash-and-stock deal valued at about $8.5 billion.
Stockholders of Family Dollar Stores will receive $59.60 in cash and the equivalent of $14.90 in shares of Dollar Tree for each share they own. The companies put the value of the transaction at $74.50 per share, which is an approximately 23 percent premium to Family Dollar’s Friday closing price of $60.66.
Family Dollar shareholders will own between 12.7 percent and 15.1 percent of Dollar Tree’s outstanding common shares at closing.
The core customers of discount stores such as Wal-Mart have been hit by the recession pretty hard because of job instability. Family Dollar has struggled and has attempted to reinvigorate sales by lowering prices on almost 1,000 basic items. It’s cut some jobs and shuttered underperforming stores. Because the company had been conducting a strategic review since the winter, investor Carl Icahn urged Family Dollar last month to put itself up for sale, Huffington Post reports.
According to Dollar Tree’s CEO Bob Sasser, the Dollar Tree-Family Dollar chain will give Dollar Tree more than 13,000 stores in the U.S. and Canada and will have sales of more than $18 billion. This merger will create a more diverse company with an enhanced geographic reach.
Dollar Tree will continue to operate under the existing Dollar Tree, Deals, and Dollar Tree Canada store signs. It will keep the Family Dollar brand as well. Dollar Tree sells products for $1 or less where as Family Dollar’s products are priced at a more broad range. Family Dollar Chairman and CEO Howard Levine will still lead those stores and report to Sasser. He will join Dollar Tree’s board.
The deal is expected to close by early next year with boards of both companies unanimously approving the deal. It still needs approval from Family Dollar shareholders.
Shares of Family Dollar Store Inc., based in Charlotte, North Carolina, surged more than 21 percent before the opening bell. Shares of Dollar Tree Inc., based in Chesapeake, Virginia, are up more than 3 percent.
This seems to be a good look for both Dollar Tree and Family Dollar. We might even get lucky and have both chains have prices of $1 or less, or maybe that’s just me being hopeful for discounts.
Featured image via Logo Share.