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It turns out that, like most items at dollar stores, the stores themselves do not cost a dollar. Dollar Tree announced Monday that it will buy Family Dollar Stores for $8.5 billion.
Dollar Tree agreed to pay $74.50 for each Family Dollar share, a 22.8 percent premium over what Family Dollar closed at on July 25. Both companies’ board of directors unanimously approved the deal, which will be completed by early next year. In the end, Family Dollar shareholders will own at least 12.7 percent and not more than 15.1 percent of common stock in Dollar Tree.
According to The New York Times, the two companies will have a combined 13,000 stores in 48 states. They also have stores in Canada. Annual sales revenue is over $18 billion for the combined companies.
Dollar Tree is going to keep Family Dollar alive as a different brand, since Dollar Tree stores sell most items at $1 or less. Family Dollar has a wider range of low-priced items.
“This is a transformational opportunity,” Dollar Tree CEO Bob Sasser said in a statement. He later added, “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.”
The Times notes that investor Carl Icahn had pushed for Family Dollar to sell itself. He has a 10 percent stake in the company.