Dollar Tree wins OK for Family Dollar takeover

Discount retailer Dollar Tree (DLTR) won anti-trust approval for its planned $9.2 billion acquisition of Family Dollar Stores (FDO) by agreeing to sell 330 of the rival's stores to a private equity firm.

Disclosing the proposed settlement Thursday, the Federal Trade Commission required divestiture of the Family Dollar stores as the price for resolving its objections to the takeover deal approved by the firms.

The companies "compete head-to-head in terms of price, product assortment, and quality, as well as location and customer service in local markets nationwide," the FTC said.

The FTC identified the 330 stores in local markets from 35 states where the agency's review concluded consumers could face lack of competition if the Dollar Tree-Family Dollar transaction were finalized as originally planned.

Without the agreed-upon divestiture, there was "increasing likelihood that Dollar Tree will unilaterally exercise market power," the FTC said in announcing the agency's 4-1 approval vote.

The locations will be sold to Sycamore Partners, a New York City-based private equity firm that specializes in consumer and retail investments.

"This settlement will ensure that consumers will continue to benefit from competition among their local dollar stores," said Debbie Feinstein, director of the FTC's Bureau of Competition.

Dollar Tree, based in Chesapeake, Va., and Charlotte, N.C.-headquartered Family Dollar said they plan to complete the transaction on Monday, subject to the satisfaction of remaining closing conditions. Finalization would create the nation's largest dollar-store chain. Family Dollar stores are expected to keep their current name as part of the deal.

Consumers will be able to submit public comments on the agreement through Aug. 3, the FTC said. After considering the responses, the agency will decide whether to make the proposed consent order final.

The proposed settlement ends months of proposals and counter-offers in which Family Dollar rebuffed a higher takeover bid from Dollar General (DG), an industry rival based in Goodlettsville, Tenn.

Family Dollar shareholders overwhelmingly rejected the higher bid in January, opting for the lower offer from Dollar Tree based on belief that the transaction would more easily win federal approval.

Shares of Dollar Tree closed down 0.4% at $79.81 Thursday before the settlement announcement. Shares of Family Dollar closed up 0.2% at $79.35. The company's stock ticked slightly higher to $79.39 in after-market trading.