Under the agreement, Dollar Tree will acquire Family Dollar in a cash and stock transaction. The value of the consideration is $74.50 per share, a 22.8% premium over Family Dollar’s closing price as of July 25, 2014.
The transaction approved by the Boards of Directors of both companies, will close by early 2015, at which time the Family Dollar shareholders will receive $59.60 in cash and $14.90 equivalent in Dollar Tree shares.
The transaction will create a leading discount retailer in North America based on number of store locations, operating more than 13,000 stores in 48 states and five Canadian provinces, with sales exceeding $18 billion and over 145,000 associates, although they will continue to operate and grow both the Dollar Tree and Family Dollar brands.
The merger will also leverage complementary merchandise expertise, generate significant synergy opportunities, enhance financial performance and improve growth prospects and will target broader range of customers and geographies
Post-closing, the combined entity is expected to achieve an estimated $300 million in annual run rate synergies by the end of the third year and estimated to be accretive to cash EPS within the first year post-closing and show strong combined financial profile with robust free cash flow generation
At closing, Family Dollar shareholders will own no less than 12.7% and no more than 15.1% of the outstanding common stock of Dollar Tree. Howard R. Levine and Trian Fund Management, L.P. and funds managed by it, which collectively own approximately 16% of the outstanding stock of Family Dollar, have entered into voting agreements in support of the merger.
“This is a transformational opportunity as throughout our history, we have strived continuously to evolve and improve our business. This acquisition, which enhances our footprint and diversifies our company, will enable us to build on that progression, and importantly, positions Dollar Tree for accelerated growth. By offering both fixed-price and multi-price point formats and an even broader, more compelling merchandise assortment, we will be able to provide even greater value and choice to a wider array of customers,” stated Bob Sasser, Dollar Tree’s Chief Executive Officer.
Howard R. Levine, Chairman and CEO of Family Dollar, said, “This combination will enable Family Dollar to accelerate efforts to improve the business and will benefit our dedicated team members who will now be part of a larger, more diverse organization. I am excited about our future with Dollar Tree, and I look forward to working with the Dollar Tree team to complete the combination as quickly as possible to realize the compelling benefits for all our stakeholders.”
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