Dollar Tree to acquire Family Dollar Stores

Chesapeake-based Dollar Tree Inc. is acquiring Family Dollar Stores Inc. in a $8.5 billion deal that will create a company with 13,000 stores and $18 billion in annual sales.

“This is a transformational opportunity,” Bob Sasser, Dollar Tree's CEO, said in a statement. ”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.”

Under the terms of the deal, Family Dollar shareholders will receive $74.50 for each share they own, including $59.60 in cash and $14.90 in Dollar Tree stock.  The price represents a 22.8 percent premium over Family Dollar's closing price on July 25.

The offer, totaling about $8.5 billion, includes $59.60 in cash and the equivalent of $14.90 in Dollar Tree shares for each Family Dollar share. When debt is included, the deal values Family Dollar at about $9.2 billion.

The combined company will operate 13,000 stores in 48 states and five Canadian provinces employing more than 145,000 workers. Dollar Tree now has 5,080 stores while Family Dollar, based in Matthews, N.C., has more than 8,200 stores.

Dollar Tree said the deal will broaden its reach. The company is the leadering operator of fixed-price point stores, selling merchandise for $1 or less. Family Dollar is a national operator of multi-price point stores for value-conscious consumers.

Dollar Tree targets a broad range of middle-class customers with stores located primarily in suburban areas, while Family Dollar targets low- and lower-middle income households through urban and rural locations.

Dollar Tree plan to finance the acquisition through a combination of existing cash on hand, bank debt and bonds. The deal is subject to approval by Family Dollar shareholders and customary closing conditions.