Family Dollar rejects rival's $9.7bn takeover bid

Dollar General store exterior Image copyright Other

Family Dollar, the US discount retailer, has rejected a $9.7bn (£5.8bn) bid from larger rival Dollar General.

Family Dollar said the offer could face competition issues and "did nothing to address" the matter.

The company said that it would continue to pursue a merger with a third discount chain, Dollar Tree.

Family Dollar and Dollar Tree had already agreed a merger before Dollar General launched a rival bid this week.

US dollar stores expanded fast during the economic downturn. But many have faced competition from stores such as Wal-Mart, and Family Dollar has been closing stores and struggling financially.

Howard Levine, chief executive at Family Dollar, said the board had "unanimously concluded that [a deal with Dollar General] is not reasonably likely to be completed on the terms proposed".

Personal decision?

But Dollar General suggested Mr Levine's support of Dollar Tree was motivated by self-interest as he would have lost his job if Dollar General had won the bid.

Under Dollar Tree's proposal, Mr Levine would remain Family Dollar's boss.

The move under Dollar General would have been good for shareholders but "perhaps not for Mr Levine personally," said the spurned company.

Rick Dreiling, chief executive of Dollar General, made the comments in a letter to Family Dollar's board on Wednesday.

Many Family Dollar stores are in deprived areas. It has a big presence in Texas and the eastern US.

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