 |
Dollar Tree’s Acquisition of Family Dollar Stores
EXCERPTS
ONE-YEAR SHAREHOLDER RIGHTS PLAN
On June 06, 2014, when the holding of a private equity investor, Carl Icahn (Icahn), rose to 9.4% , Family Dollar adopted a one-year shareholder rights plan with a trigger of 10% holding. Under this plan, the acquisition would be expensive to an individual or a group because when the stake of an investor or a group exceeded 10% of the company’s shares, it would issue new shares to its remaining investors except the holder of the 10% stake. Through this, the company intended to avoid the acquisition of the company by one investor or group. Edward Garden, director of Family Dollar and a founding partner of activist hedge fund Trian Fund Management LP , voted against the approval of the shareholder-rights plan. However, the one-year shareholder rights plan would not be applicable when the other company would like to acquire Family Dollar. In early 2011, Nelson Peltz , with a holding of an 8% , came up with an offer for Family Dollar, but the management of the company rejected the offer... |
|
PROPOSED ACQUISITION
Dollar Tree offered to acquire Family Dollar paying US$ 74.50 per share in cash and stock. The deal was so structured that US$59.60 would be paid in cash and US$14.90 in stock...
EXPECTED BENEFITS OF MERGER
Dollar Tree was set to become the second largest retail chain store in the US after the acquisition of the Family Dollar business. It would have more than 13,000 stores in 48 states and Canada (Refer to Exhibit II for Retail Stores in USA - Major Players)...
CRITICISM
Icahn was not satisfied with this merger strategy. He said that under the deal, the shareholders of Dollar Tree benefitted more than Family Dollar investors. Icahn himself made a profit of more than US$ 100 million after the announcement of the acquisition...
Exhibits
Exhibit I: Acquisitions by Dollar Tree Inc
Exhibit II: Retail Stores in USA - Major Players
Exhibit III: Closing Price of NASDAQ and Companies’ Share
