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Dollar Tree To Buy Family Dollar In $8.5 Billion Deal

People shop outside of a Family Dollar discount store in Waterbury, Connecticut.
Spencer Platt Getty Images
People shop outside of a Family Dollar discount store in Waterbury, Connecticut.

With Dollar Tree's agreement to purchase Family Dollar on Monday, two of the United States' biggest discount stores are coming together in a deal estimated at $8.5 billion in cash and stock.

The New York Times reports:

"The deal comes amid pressure on Family Dollar by the activist investor Carl C. Icahn, who urged the company last month toexplore a sale of itself. But Family Dollar said in a statement that it had been exploring strategic options since the winter."Under the terms of Monday's deal, Dollar Tree will pay $74.50 for each share of Family Dollar. The bid is made up of $59.60 a share in cash and Dollar Tree stock worth about $14.90. Including debt, the deal values the target company at about $9.2 billion."The bid represents a premium of nearly 23 percent to Family Dollar's closing price on Friday."

The Wall Street Journal reports the deal has been approved by the boards of both companies. Dollar Tree, the Journal reports, will continue to operate Family Dollar as a separate brand and keep Family Dollar CEO Howard Levine.

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The paper adds some background:

"Family Dollar, with more than 8,100 stores across the country, has been at a crossroads in its retail strategy. Early this year, Mr. Levine said the chain was shelving a strategy that used price cuts on some items, while keeping others elevated, and instead would emulate the everyday low price model favored by rivals Dollar General and Wal-Mart."In April, Family Dollar said it would close about 370 stores and lower prices on nearly 1,000 basic items in an effort to remain competitive. Earlier this month, it reported its fiscal third-quarter earnings slid 33% as higher costs offset a slight increase in revenue."Meanwhile, activist investors—like Mr. Icahn—have been flexing their muscles this year, pushing for everything from sales to boardroom shake-ups."

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