United States: Dollar General—"Setting The Record Straight" On Antitrust For Family Dollar

Last Updated: September 12 2014
Article by Jonathan L. Lewis

Unless you have been in the middle of a bidding war where antitrust concerns are front and center, what is playing out between Dollar General and Family Dollar is probably unfamiliar to you, as it is rarely seen outside of the boardroom.

To get you up to speed, back in July Family Dollar agreed to be acquired by Dollar Tree for $8.5 billion. Not wanting to be left on the sidelines, Dollar General upped the bidding by responding with an unsolicited offer of $8.95 billion. In a matter of days, Family Dollar rejected that offer "on the basis of antitrust regulatory considerations" even though Dollar General committed in its offer "to divest up to 700 retail stores in order to achieve the requisite antitrust approvals" and agreed "to fund the $305 million break-up fee" that Family Dollar would owe Dollar Tree if it terminated the Family Dollar/Dollar Tree merger agreement. Apparently, the 700 stores "is approximately the same percentage of the total combined stores represented by the 500 store divestiture commitment in the Dollar Tree merger agreement." (A break-up fee is payable by the seller to the buyer where, for example, the seller terminates, because a better deal comes along.)

Dollar General has now upped the ante in a very public and detailed way. In a press release attaching a detailed letter to Family Dollar's Board of Directors from Dollar General's Chairman and CEO, Rick Dreiling, Dollar General makes its case for why a Dollar General/Family Dollar combination is doable. Not only has Dollar General upped its offer to $9.1 billion, but it also committed to divest up to 1,500 stores "if ordered by the Federal Trade Commission ("FTC")" to clear the deal and, "as further evidence of its confidence in its ability to obtain antitrust approval," Dollar General has "agreed to pay a $500 million reverse break-up fee to Family Dollar relating to antitrust matters." (A reverse break-up fee is payable by the buyer to the seller where, for example, regulatory approvals are not given.)

Why does Dollar General believe so strongly that it can complete "the potential transaction [even] on the terms initially proposed"? According to Mr. Dreiling's letter, Dollar General's antitrust lawyers and expert economists have been conducting the same analyses they "would expect the [FTC] and its economists to perform." This is why they have so much "confidence in [their] ability to complete the proposed transaction and that the 700 store divestiture commitment in [their] prior proposal provided more than sufficient cushion to the clear any FTC review." To validate that belief, Dollar General has gone so far as to engage the former Director of the Bureau of Competition at the FTC to review that work. Mr. Dreiling's letter notes that the former Bureau Director "concurs in [their] view that the transaction can be completed on the terms previously proposed."

What has Dollar General gotten from all the work its antitrust lawyers and expert economists have been doing? According to Mr. Dreiling's letter, Dollar General's lawyers and experts believe that "the FTC will evaluate this transaction as involving a 'fill-in' shop/trip instead of a 'destination' or 'stock-up' shop/trip" merger, and not as "a traditional grocery store merger." Down playing what Family Dollar's own documents may say about that, Dollar General believes that its own data and "document will be much more important to the FTC." Those documents and data are said to demonstrate, among other things, that: (1) Wal-Mart, not Family Dollar, is the primary driver regarding Dollar General's strategic and pricing decisions; (2) approximately 75% of Dollar General's SKUs are nationally priced (i.e., not subject to zone pricing); (3) Dollar General views that competitive market broadly, factoring in a wide variety of retail outlets, including mass, club, drug and grocery, as well as independent retailers, each of which acts as a competitive constraint on Dollar General's pricing; (4) each of the above retail outlets sells the sort of items that Dollar General sells, and there is nothing unique about these products; (5) Dollar General is a fill-in shop/trip, not a destination or stock-up shop/trip; and (6) Dollar General's customers are going to their primary destination stores weekly and have access to all of the same SKUs which are available for fill-in at Dollar General.

For its part, Family Dollar has confirmed that it has received Dollar General's latest offer, stating that it "will review and consider the revised proposal" in "consultation with its legal and financial advisors." Those are the same "legal and financial advisors" that, according to Mr. Dreiling's letter, may be "analyzing this transaction as if it were a potential grocery store merger or utilizing data that tells a story much different than Dollar General's documents and data." Mr. Dreiling's letter continues that Dollar General's "enhanced proposal and commitments should sufficiently address any concerns that led [Family Dollar] to reject [Dollar General's] prior proposal" and that the Family Dollar Board "should engage with us." If not, Dollar General says that it "will consider taking [its] persuasive and superior proposal directly to [Family Dollar's] shareholders."

So, what's up next for Dollar General and Family Dollar? The ball is in Family Dollar's court to determine whether Dollar General is right regarding the deal's prospects at the FTC given the most recent commitments. How all of this plays out may well depend on how Family Dollar's own data and documents fit in and what weight they deserve in the overall analysis of the deal.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions