Family Dollar Store, Inc. acquired by Dollar Tree, Inc.

It was announced this morning that Dollar Tree Inc (DLTR) has struck a deal to acquire Family Dollar Inc (FDO), in what is estimated to be an $8.5 billion transaction. Family Dollar currently operates 8,100 stores, as opposed to Dollar Tree’s 5,000.

This acquisition is projected to make Dollar Tree the highest grossing discount retailer in North America.

This follows a campaign by Family Dollar investor Carl Icahn urging the board to sell the company. Several potential suitors have been linked to Family Dollar in the past, including Dollar General, but it seems that Dollar Tree was the first to strike a deal.

Dollar General’s stock immediately took a 3% drop after the announcement as some analysts were concerned about their ability to compete.

Dollar Tree’s hope is that the diversity of products offered between the two concepts and more efficient distribution channels as a result of the acquisition will help the newly formed entity compete with retailers such as Wal-Mart and Kroger.

It will be interesting to see what effects this has on the net lease industry. Depending on how much cash Dollar Tree will use in the acquisition, this could have a substantial effect on the strength of the guarantor on their net lease properties. The CEO of Dollar Tree did say that he did not envision co-location being a problem for the two brands, but some number of store closings is generally expected when two competing retailers merge.

Brad Motley, COO
(817) 768-6364

KW Net Lease Advisors