If you've been paying attention to the news lately then you probably have a good idea of how scorned Dollar General was by the acceptance of Dollar Tree's $8.5 billion bid for Family Dollar. Dollar General's distain for the acquisition stems from the fact that it had long sought to acquire Family Dollar and had even offered $9.1 billion for the discount retailer.
Feeling like it did not get a fair chance in the bidding process, Dollar General has decided to take the fight to shareholders, offering them $80 a share, which is more than Dollar Tree has agreed to pay. But if it makes business sense to accept the highest bid for your company, then why wasn't this the case with Family Dollar? It's a question we hope to answer for our California readers in today's post.
According to some sources, there was a huge risk with accepting the highest bid. This was something that no doubt weighed heavily on the minds of Family Dollar's board members, who may have been concerned that the Federal Trade Commission wouldn't approve the acquisition of its company by Dollar General.
The issue at hand concerns antitrust laws. For those who may not know, antitrust laws protect fair competition by preventing unlawful mergers or acquisitions that could corner the market. As you may remember, this was the all-encompassing problem with the Sprint and T-Mobile merger that was proposed last year. The merger was later called off because of these concerns.
But while the acquisition of Family Dollar may be less risky, it will likely still fall under the scrutiny of the FTC. In fact, regulators will have to carefully consider the current offer and assess the risk to the current market. In the end, it may be left to the courts to decide whether the business transaction is illegal or not based on the specifics of the case.
Source: The New York Times, "Dollar General Makes Hostile Bid for Family Dollar," David Gelles, Sept. 10, 2014