Rick Dreiling, chairman and CEO of Dollar General Corp., Goodlettsville, Tenn., said Friday he plans to retire as CEO at the end of May 2015 or upon the appointment of a successor — a move that had Wall Street analysts debating whether it meant a potential merger with Family Dollar Stores was more likely or less.

Dreiling, 60, is a former Safeway executive who has been CEO of Dollar General since January 2008 and chairman since December 2008. He said he will continue as chairman during a transition period following the appointment of a new CEO.

Charles Grom, an analyst with Sterne Agree, New York, said Dreiling’s pending departure “supports the mosaic we’ve built in the past six-plus months that a Family Dollar-Dollar General merger is not imminent.

Senior-level management changes at Dollar General — including the promotion of Todd Vasos to COO last November and the hiring of David D’Arezzo to succeed Vasos as chief merchandising officer — “were likely indicative of succession planning to deepen the bench at the top of the company.

“Indeed, it would be a strategic mistake to hand the reigns over to a new CEO ahead of a transformative acquisition, [so] the probability of a deal is much lower today.”


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Daniel Binder, an analyst with Jefferies & Co., New York, expressed a different viewpoint. “While the easy read is today’s news means no deal between Dollar General and Family Dollar, we do not conclude the same. Clearly, it would take a bit longer as a new CEO needs to be appointed, but a deal makes more sense than ever.

“Reaction [on Wall Street] appears extreme, as the market factors in the possibility that a deal is less likely — hence no synergies and a reversal of the recent run-up on speculation — and the fact Dollar General is losing a high-quality CEO when industry and Dollar General’s operating metrics continue to show stress.

“Family Dollar shares are down less than Dollar General shares because Carl Icahn remains a powerful force in the story and is likely being perceived as someone who will still get something done. Most likely, he continues to seek a sale, and if that fails, then [the result will be] some changes in management with a goal of improving operating metrics.”

Binder said it may be simply a coincidence that Dreiling’s decision to retire occurred a week after Icahn Capital threatened a hostile takeover of Family Dollar as part of an effort to merge the two dollar-store operators, "[but we don’t believe in big coincidences.”

He said Dreiling may have accelerated his announcement because Family Dollar is in play, “[which] may give the Dollar General board an opportunity to find a replacement with the desire and right skill-set to integrate two companies if a deal is eventually struck.”

He also said he found it “interesting” that Vasos, whom he called Dreiling’s heir apparent, was not immediately named to succeed him as CEO.

“It would seem reasonable to conclude that the board and Dreiling agree that the responsible thing to do is to accelerate the process of finding the next CEO who could lead the company through a [merger] process, assuming they want to do a deal with Family Dollar or wish to grow organically or via acquisition.

“An integration would take about three years. It would also make sense under this scenario that the board should consider other candidates beside Vasos — perhaps others that have greater integration experience. While Vasos may still end up being the board’s choice, it may be a more complex decision than before and one worth giving more consideration to.”


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