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Dollar General enters bidding for Family Dollar

By WTOP Staff

MICHELLE CHAPMAN
AP Business Writers

NEW YORK (AP) — Dollar General isn’t about to be left out in the cold. The discounter is starting a bidding war for Family Dollar with an approximately $8.95 billion offer as it attempts to trump a Dollar Tree bid.

For Dollar General, the decision to enter the fray was clear because Family Dollar had been on its radar for a while. Dollar General Chairman and CEO Rick Dreiling said during a conference call Monday that the company had expressed interest in combining with Family Dollar multiple times over the last few years.

While Dreiling didn’t disclose if there’d been any sticking points in working out an agreement in the past, he said Dollar General was very surprised when Family Dollar announced its deal with Dollar Tree. Despite the shock, Dollar General remains undeterred in trying to work out a transaction.

“It’s all water under the bridge. We’re ready to move forward,” Dreiling said.

While Dreiling was planning to retire from the CEO post in May 2015, he’s agreed to postpone his retirement until May 2016 in order to help with the integration of the two companies.

One reason Dollar General is angling for Family Dollar is its customer base. Dreiling said that Family Dollar is strong in metropolitan areas, while Dollar General’s strength lies in rural markets.

“Maybe we’ll be able to learn something from each other,” he said.

The two businesses also have similar pricing strategies, offering shoppers most products at $10 or less. At Dollar Tree, everything in its stores costs just a buck.

While Dollar General and Family Dollar have several complimentary aspects of their businesses, a combination would also help eliminate some competition in the sector.

Dreiling said that even though retailers like Wal-Mart Stores Inc. have been opening smaller-format stores to try to lure lower-income customers, Dollar General’s business has actually been hurt worse when a Family Dollar store opens near one of its locations.

But that doesn’t mean that Wal-Mart and other retailers like Kroger Co. aren’t a competitive threat still. By bringing Family Dollar into the fold, Dollar General can not only eliminate the rivalry — it can also bolster its muscle to help ward offer bigger players.

A Dollar General and Family Dollar combination would create a chain with almost 20,000 stores in 46 states and sales of more than $28 billion.

Family Dollar has also come into play because of its business struggles. The Charlotte, North Carolina company has been shuttering stores and cutting prices in hopes of boosting its financial performance. In June investor Carl Icahn urged the company to put itself up for sale.

Dollar General Corp. said it would pay $78.50 per share in cash. That’s 3 percent higher than Family Dollar Stores Inc.’s Friday closing price of $76.06. Dollar General put the deal’s value at $9.7 billion.

Last month Dollar Tree Inc. made an $8.5 billion bid for Family Dollar. It offered to pay $59.60 in cash and the equivalent of $14.90 in shares of Dollar Tree for each share held. The companies valued the transaction at $74.50 per share at the time. Including debt and other costs, the companies estimated the transaction to be worth approximately $9.2 billion.

It remains to be seen if Dollar Tree will boost its offer for Family Dollar, and Wal-Mart recently said it’s not interested in acquiring a dollar chain. Dreiling would not comment on whether Dollar General would be willing to increase its bid.

“We have a great deal on the table. Let’s let it all play out,” he said.

Representatives for Dollar Tree did not immediately respond to requests for comment. Family Dollar said its board would review the proposal.

Dollar stores really came to the forefront of consumers’ minds during the recession, as people across income groups searched for ways to save money. To attract a broader array of customers, they also expanded their offerings to include more groceries and brand-name products, instead of just the party favors and other knickknacks people often associated with them.

More recently, however, sales at dollar stores have been suffering because the lower-income customers who shop there are facing persistent job instability and slow wage growth in the aftermath of the recession. And higher-income customers began to shift away from dollar stores a bit once the economy began to strengthen.

If Dollar General winds up reaching an agreement with Family Dollar, the Goodlettsville, Tennessee company anticipates annual savings of $550 million to $600 million three years after closing. Integration costs are projected to total between $300 million and $400 million.

Dollar General believes it can quickly address any antitrust issues and is willing to divest up to 700 of its stores in order to get the necessary approvals for the transaction. Dollar Tree had agreed to divest 500 of its U.S. stores for its proposed deal.

Dreiling has also agreed to remain as a director — and would be willing to serve as chairman — if asked by the board and elected by shareholders. Todd Vasos, Dollar General’s chief operating officer, will be responsible for handling the day-to-day integration of the two companies.

Dollar General said that Goldman Sachs and Citigroup Global Markets Inc. have agreed to provide committed financing, which would include the $305 million termination fee due to Dollar Tree if Family Dollar chooses a deal with Dollar General instead.

Dollar General’s board unanimously approved the Family Dollar deal. The company anticipates completing the transaction on a similar time frame as the one Dollar Tree announced, which was by early 2015.

Shares of Dollar General stock climbed $6.41, or 11 percent, to $63.87 in afternoon trading.

Family Dollar’s stock gained $3.83, or 5 percent, to $79.89. Shares of Dollar Tree, which is based in Chesapeake, Virginia, fell $1.12, or 2 percent, to $54.48.

_____

Anne D’Innocenzio contributed to this story from New York.

Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Don’t Settle for Student Loans to Pay for Online Education

By WTOP Staff
Online college programs are becoming a more popular choice for prospective students, with one study finding that more than 6 million students enrolled in at least one online course in fall 2015. The popularity of these courses can be attributed in part to their flexibility with working adults' schedules, students' ability to progress more quickly through online programs and, oftentimes, cheaper tuition. [See 10 low-cost online bachelor's programs for out-of-state students.]Online degrees can be beneficial to many college students, but some studies have shown online learners complete their programs at lower rates than students at traditional brick-and-mortar campuses. Individuals with student loans but no degree comprise two-thirds of defaulted borrowers. Though these numbers are not encouraging, just like for traditional programs, there are ways to reduce how much you'll need to borrow for an online program to ensure you won't become one of these statistics. Don't just settle on borrowing student loans to cover the whole cost of your program and living expenses. Instead, start thinking about how to cut costs and cover your balance in different ways, such as the following. -- Grants and scholarships: Even though you are taking an online course, you can still apply and receive grants and scholarships. But your first step should be to complete the Free Application for Federal Student Aid, commonly referred to as the FAFSA, which will allow you to receive a Pell Grant if your expected family contribution is low enough. The EFC criteria and award amounts are adjusted annually, but the 2017-2018 academic year awards range from $606 to $5,920, which could significantly lower the amount you borrow annually. Your next step is to apply for scholarships. You can start by checking online scholarship search engines, such as the Salt Scholarship Search, College Board's BigFuture and Peterson's. But don't forget to take advantage of local organizations and your school's financial aid office. Both may offer scholarships that you can't find with a national scholarship search. [Review these 10 sites to kick off your scholarship search.]For instance, organizations like the Elks Club, Knights of Columbus or the Rotary Club typically offer scholarships annually to local students. Just because you're going to school online doesn't mean you're ineligible. Visit your local library for scholarship listings, and ask around town. You might be surprised how many local organizations offer scholarships. While these scholarships typically aren't large, every little bit counts. Each dollar you receive in a scholarship is a dollar you don't have to borrow and pay interest on. -- Work-study: Another option for online students may be work-study awards. Not all students enrolled in online programs are eligible, but students at some schools -- including, for example, SUNY Empire State College and Liberty University -- are. Work-study awards are not given upfront like scholarships and grants. In most cases, they are an offer to earn up to the awarded amount if you secure an eligible work-study job. While there is a misconception that all work-study jobs must be on campus, students can work for off-campus, nonprofit or public employers as long as the work is in the public's interest. You may be able to work for a for-profit employer if the job is relevant to your course of study. No matter who the outside employer is, it will need to have an established agreement with your college for you to receive work-study funds. Remember, to be eligible for federal financial aid, you must be enrolled and pursuing a degree or certificate. If you're not working toward a credential, Pell Grants and work-study won't be option, but you may still be able to take advantage of private scholarships -- just be sure to read the eligibility criteria carefully. [Explore what to know about financial aid in online programs.]-- Pay as you go: One of the great benefits to enrolling online is the flexible schedule, which can allow you to complete your college coursework around your responsibilities. But prospective students often overlook using their part- or full-time job earnings as an option for paying for college. Almost 80 percent of college students in 2015 worked at least part time while attending classes, according to the National Center for Education Statistics. By budgeting and thinking strategically about your college costs, you can likely reduce your dependence on student loans by paying a portion out of pocket. Many -- but not all -- online programs are less expensive than traditional programs and often have shorter payment periods. Six, eight or 10 weeks are common course durations. Because of the frequency of payments in an online setting, you may be well-placed to pay as you go and possibly avoid borrowing altogether. Attending college online and avoiding student loans may be challenging, but if you are willing to put in the effort, you can limit the amount you need to borrow. More from U.S. News Q&A: Understanding Student Loan Discharge Eligibility Student Loan Refinancing Isn't Right for All Borrowers
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