Dollar General may have to divest more than double the 1,500 stores it said it was willing to sell if it wants to gain regulatory approval to buy arch-rival Family Dollar, The Post has learned.
The Federal Trade Commission may require the country’s No. 1 dollar store chain to divest more than 4,000 stores to win approval of its stalled $9.1 billion merger proposal, two sources close to the situation said Tuesday.
There is concern among the FTC staff that the two chains are mainly in competition with each other — and not with Walmart, drugstores and supermarkets, the sources said.
“The question is whether the [vastly increased] number of divestitures will allow [Dollar General’s] deal to work financially,” according to one source close to the situation.
Getting the FTC to change its mind on what retailers are its biggest rivals could take as long as six months — but rival Dollar Tree, the No. 3 chain in the sector, wants a vote on its proposed Family Dollar merger by Dec. 31, according to insiders.
Without the time to fully explain its case in Washington, Dollar General could be forced to either raise its bid, throw in the towel on the merger — or live with the added number of divestitures, according to sources close to the situation.
Its offer for Family Dollar expires on Dec. 31.
Currently, Dollar General and Family Dollar operate a total of 20,000 stores. Regulators are concerned a merger would eliminate price competition.
In papers submitted to the FTC, Family Dollar indicated rival dollar stores are its chief competitors, a source said.
Dollar General CEO Rick Dreiling may have hurt his cause in August when he said in a call, “The hits we’ve taken on [competition with Wal-Mart] so far have actually been less than what happens when a Family Dollar opens up.”
Dollar General’s $80-a-share proposal is more than the $74.50 offer from Dollar Tree, the No. 3 dollar-store chain, which has been blessed by Family Dollar’s board.
Family Dollar shares closed Tuesday at $78.85, reflecting investor hopes that Dollar General is still in the running.
Regulators have been pressuring Dollar Tree, telling the chain it will have to sell a “substantial” number of stores to gain approval, two sources close to the situation said. Dollar Tree had believed it might not have to sell any stores.
Dollar Tree plans to accept the FTC remedy instead of giving regulators more information, which would take them more time to review, sources said.