Dollar General Offers Major Antitrust Concessions as It Lifts Bid for Family Dollar

Tickers in this article: DG FDO

Updated from 7:29 a.m. EDT with comments from Family Dollar, Dollar General and analysts.

NEW YORK ( TheStreet) -- Dollar General raised the stakes in its competing bid for Family Dollar , offering $80 a share in cash and major antitrust concessions that may force the two discount retailers to the negotiating table after a one-month standoff.

Dollar General said Tuesday it would increase its takeover bid for Family Dollar, while also offering two major concessions: a $500 million reverse termination fee in the event antitrust regulators nix the deal, and a promise to divest up to 1,500 stores if the Federal Trade Commission orders the company to do so.


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That higher bid, combined with significant antitrust concessions, may force Family Dollar to the negotiating table. Family Dollar has so far rejected Dollar General's attempts at a merger, instead recommending investors support a $74.50 a share cash-and-stock offer from Dollar Tree , which comes with lower antitrust hurdles and has the support of CEO Howard Levine and hedge fund Trian Management, who own a combined 16% of the company's outstanding shares.

Read More: The Ball is in Dollar General’s Court

Trian, an activist hedge fund with a seat on Family Dollar's board, has raised concerns about the antitrust risks of a merger with Dollar General. It will be interesting to see if Dollar General's reverse termination fee and its agreement to divest up to 1,500 stores changes Trian's opinion.

Previously, Dollar General had offered Family Dollar shareholders $78 a share in cash and a promise to divest up to 700 stores, an offer Family Dollar and its board found insufficient to break its existing deal with Dollar Tree.

Dollar General also said it added law firm Boies, Schiller & Flexner to its review of antitrust work. Already, the company has relied upon Simpson Thatcher & Bartlett and economist Compass Lexecon to do its antitrust analysis.

"We are confident that our enhanced proposal sufficiently addresses any concerns that led Family Dollar's Board of Directors to reject our prior proposal without any discussions between our companies," Rick Dreiling, Dollar General's CEO, said in a statement. "Even as a secondary antitrust review supported our previous proposal, we revised our offer to demonstrate the seriousness of our commitment," he added.

Family Dollar confirmed it had received Dollar General's offer, but the company said its board is reviewing the proposal and hasn't made a recommendation.

Shares in Family Dollar were rising less than 1% to $80.20, while Dollar General shares were trading higher at $64.40 in Monday morning trading.

Breaking A Dollar Deal

If Family Dollar breaks its deal with Dollar Tree, the company will be on the hook to pay a $305 million termination fee. That move may also create a bidding war between Dollar General and Dollar Tree for Family Dollar.