Dollar General Corp. (DG) Unhappy With FTC’s Method Of Evaluation


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Dollar General Corp. (NYSE:DG) recently announced that the company is facing higher than expected hurdles from antitrust regulators in its efforts to acquire Family Dollar Stores, Inc. (NYSE:FDO). The company alleged the Federal Trade Commission (FTC) of using controversial review model for its all-cash $9.1 billion bid to acquire Family Dollar.

Family Dollar previously argued that the bid would face strong regulatory hurdles because consolidation with the nation’s biggest dollar-store company could negatively impact price competition in the industry. Family Dollar shareholders are scheduled to vote next week on whether to consider Dollar Tree, Inc. (NASDAQ:DLTR)’s cash-and-stock bid valued at $8.7 billion.

The recent announcement certainly comes at odds of Dollar General Corp. (NYSE:DG)’s belief that it would be able to clear regulatory hurdles and wouldn’t require to divest to get the deal done. But now, the company seems to be surprised by the FTC’s methodology to review the pricing impact of consolidation.

In its statement, Dollar General said that the Commission seems to be departing from the usual approach used for reviewing retail mergers over recent years. The company also alleged that the FTC relied on an “untested” theoretical model for analyzing pricing impact. Dollar General mentioned that the worth of that model as predictor of price increases is also controversial.

Analysts now view this statement as Dollar General Corp. (NYSE:DG)’s defeat in the months-long fight in acquiring Family Dollar. In addition, Dollar General hasn’t yet made it clear whether it would increase its bid before Family Dollar shareholders vote next week to consider Dollar Tree’s bid. Experts believe the momentum to be in favor of Dollar Tree, which has also received the voice of support from proxy advisers Glass Lewis & Co. and Institutional Shareholder Services.

Analysts see No. 3 Dollar Tree and No. 2 Family Dollar combination as a done deal as it could be more “palatable” to regulators than the Dollar General-Family Dollar combination.

Lisa Ray

Lisa Ray primarily covers Retail and Healthcare. Lisa Ray has completed her MBA (Finance) and an avid market tracker. She is a stock market analyst who closely tracks US markets along with other global markets like India. She has been expressing her views for years about markets and also advises various clients.

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