Regulators have a discount-store quandary on their hands.
Antitrust officials reviewing Dollar General's $9.1 billion hostile bid for Family Dollar are trying to figure out whether deep discounters compete only with each other or operate in a much broader category that includes megastores like Walmart and traditional grocery stores.
The decision is about more than deciding where Americans buy their milk and household products. If regulators determine that the category is narrow, it would likely put the kibosh on the Dollar General bid.
Conversely, a broader finding would OK the bid and, perhaps, put Family Dollar in the midst of a bidding war. "That is the fundamental question everyone is waiting on," said a source close to the situation.
Dollar General, the No. 1 dollar store chain in the US, has offered Family Dollar, the No. 2 chain, $80 a share and said it would be willing to divest up to 1,500 stores to win antitrust approval — as well as pay a $500 million fee if it can't get the deal past regulators.
Family Dollar has rejected the offer over antitrust concerns, and instead has recommended a $74.50-a-share merger with the No. 3 chain, Dollar Tree Stores.
The FTC, while weighing just how to categorize the dollar-store sector, last Friday issued a second request for more information from Dollar General, two sources close to the situation said.
For Family Dollar shareholders, time matters. The longer the FTC takes to decide, the nearer Dollar Tree gets to closing its lower-priced merger.
The Federal Trade Commission is expected by the middle of next month to approve the Dollar Tree deal — and the chain's shareholders are expected to vote on the merger as soon as Nov. 30.
"I was hopeful the FTC would be a few weeks ahead of where it is" so Dollar General could have the information needed to perhaps make its bid unconditional, one hedge-fund investor told The Post.
Family Dollar has the right to act when Dollar Tree gets FTC approval and delay the shareholder vote for 45 days.
Dollar General and Family Dollar declined to comment.
Shares of Family Dollar closed Wednesday at $76.53, comfortably higher than Dollar Tree's $74.50-per-share offer.
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