Dollar General Corp (DG.N) might be on the verge of divesting 4 thousand stores, more than the 1500 it earlier said it was willing to do. The reason behind this is that Dollar General (DG.N) is aiming to buy longtime competitor Family Dollar and it needs regulatory approval. Initially Dollar General (DG.N) reckoned that 1500 stores would make up for enough finances but that hasn’t been the case. Sources claimed that The Federal Trade Commission has told Dollar General (DG.N) that it’ll take more than 1500 stores for the 9.1 billion merger proposal, pitched by Dollar General Corp (DG.N) to fall through.
The regulatory approval will cost the company at least 4000 stores. Federal Trade Commission is also of the view that the merger will enhance the friction between the two companies and eventually both companies will suffer. Dollar General (DG.N)’s attitude towards the deal has been ruthless, as if it desperately wants the deal to fall through, although it is in strong competition with Family Dollar. Federal Trade Commission’s concern is a genuine one.
Another alternative to this, which too would be unsavory to Dollar General (DG.N), is that it can raise its bid significantly in order to get the regulatory approval. Either way it would cost Dollar General (DG.N) a lot more than what the company thought initially. It’s almost double than what the company originally proposed. For Dollar General (DG.N) it seems it’s more like a matter of pride rather than a simple business deal. It is pushing harder and harder for the deal to be finalized and for the proposal to be accepted.
It won’t come as a surprise if Dollar General Corp (DG.N) increases the bid or complies with selling 4 thousand stores. Another question arises: if the deal falls through, will the merger work successfully when it comes to finances? Dollar General Corp (DG.N) will sell 4 thousand stores, which will be a significant cut from Dollar General Corp (DG.N)’s financial inventory. How would it manage to keep the merged company afloat? Will it have financial backings of some sort?
Regulators voiced their concern about the elimination of price competition if the merger happens. Both the companies operate 20,000 stores; the merger might take a hard toll on the small end competitors surrounding these two companies. Dollar General Corp (DG.N)’s bid is currently being investigated by the state attorney general over competitive concerns because there is a general fear of the competition being eliminated from the whole equation.
Dollar General (DG.N)’s proposal, which is 80 dollar per share, is more generous than what other competitors have offered. Dollar General Corp (DG.N) is still in the run to grab the deal but it’s going to cost the company a substantial amount of revenue to turn this deal into its favor. Time will reveal whether Dollar General (DG.N)’s offered is reconsidered or rejected on the basis of fear of eliminating competitors and creating a monopoly.