Showdown Amongst Discount Retail Stocks: Will Mergers Pay Off?

Tickers in this article: DLTR DG FDO TGT WMT

By Ross Crutchfield for Kapitall.

As the economy improves discount retailers still have a hold on more budget-minded consumers. These companies, once thought recession-proof, are now competing over every single dollar bill.

On Monday, Dollar Tree Inc. (DLTR) agreed to acquire Family Dollar Stores Inc. (FDO) for about $8.5 billion. The resulting giant discount chain will have more than $18 billion in sales with 13,000 locations—a significantly larger presence than long time industry leader Dollar General (DG).

Janney analyst David Strasser suggests Walmart (WMT) or Target (TGT) could be interested in acquiring Dollar General in efforts to expand their smaller store footprint and maintain its status as a hub for discount shoppers.

Carl Icahn and Nelson Peltz, both prominent activist investors, acquired major stakes of Family Dollar and pushed for the sale offering both Dollar Tree and Dollar General a chance to bid.

Yesterday’s agreement increased the value of Icahn’s stake of Family Dollar by about $150 million while increasing the value of Peltz’s Trian Fund Management firm’s stake by approximately $115 million.

Not too bad. 

Will two be better than one? Do you think the now lone wolf Dollar General can take on the combined new entity? Use the list below to begin your analysis and let us know what you think in the comments. 

Click on the interactive chart to view data over time. 

 

 

1. Dollar Tree, Inc. (DLTR): Operates discount variety stores in the United States and Canada. Market cap at $11.21B, most recent closing price at $54.22.

 

 

2. Dollar General Corporation (DG): Operates as a discount retailer of general merchandise in the southern, southwestern, midwestern, and eastern United States. Market cap at $16.87B, most recent closing price at $55.61.