Two of the biggest U.S dollar-store chains are joining forces. Dollar Tree announced it will pay about $8.5 billion in cash and stock to acquire Family Dollar Stores.
"This is a transformational opportunity," said Bob Sasser, Dollar Tree's CEO, in a press release. "With the acquisition of Family Dollar Stores, Dollar Tree will become a leading discount retailer in North America, with over 13,000 stores in 48 states and five Canadian Provinces, sales of over $18 billion, and more than 145,000 associates on our team. We will continue to operate under the Dollar Tree, Deals, and Dollar Tree Canada brands, and when this transaction is complete, we will operate under the Family Dollar brand as well. Throughout our history, we have strived continuously to evolve and improve our business. This acquisition, which enhances our footprint and diversifies our company, will enable us to build on that progression, and importantly, positions Dollar Tree for accelerated growth."
Sasser siad buying Family Dollar will help Dollar Tree reach more lower-income customers and strengthen and diversify its store footprint. "Combined, our growth potential is enhanced with improved opportunities to increase the productivity of the stores and to open more stores across multiple banners."
Several dollar-store chains, including Family Dollar, have reported underwhelming financials and shaky same-store sales growth in recent quarters. Overexpansion or at least expansion at too aggressive a pace has triggered consolidation, says Sandy Skrovan, research director, U.S. for consulting firm Planet Retail. "It's now a two-horse race with Dollar General and a pumped-up Dollar Tree jockeying for ascendancy in the US value channel," Skrovan said. "Via this assertive move, Dollar Tree could very well leapfrog long-time market leader Dollar General. The merger also provides additional and more formidable competition for Walmart as it accelerates its own small-box expansion via Walmart Express."