It is a transaction measured in billions of dollars, but its impact will be felt locally in single dollar bills.
Two storefront retailers in the dollar store category have agreed to a merger. Dollar Tree Inc. will acquire competitor Family Dollar in a cash and stock transaction worth about $8.5 billion.
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Dollar Tree will continue to operate under the existing Dollar Tree banner and will keep the Family Dollar brand as well, but that still leaves questions about the fate of stores that are in close proximity and whether pricing will remain the same.
Customers who spoke about the merger at local Dollar Tree and Family Dollar stores are very much aware of the key difference between the two chains — at Dollar Tree, every item is a dollar or less, while at Family Dollar, prices vary by item.
At The Concourse in Waterville, where a Family Dollar and a Dollar Tree are in the same shopping plaza, customers had plenty of questions on Monday about what the merger will mean.
Deryck Smith and Meagan Emery of Winslow shop at both stores and said they sense that a merger is a good idea, but they want to know more about whether the prices will change.
“It’s more expensive over there,” Emery said, pointing to Family Dollar.
Linda and Dave Blanchard of Fairfield Center emerged from Dollar Tree on The Concourse Monday afternoon, laden with bags of coffee and other kitchen-related items. They said they had not heard that the companies that operate the stores, which they frequent, will merge.
“Here at Dollar Tree,” Linda Blanchard said, “we can come in and know when we touch an item, it’s going to be a dollar. At Family Dollar, the prices aren’t always on the items. It’s confusing and somebody on a budget — how do they know? They might think they’re picking up a dollar item and it might be a $3 item.”
Dave Blanchard held up a package of four coffee pods he purchased at Dollar Tree for $1 and said he hopes the prices at the store remain the same.
“You can’t buy that anywhere else for that price,” he said.
Other customers of the dollar stores cited the convenience of the downtown location, an especially important factor for customers who do not drive and rely on the dollar stores over big box discounters such as Walmart, which are located in large shopping areas on the outskirts of town.
Lisa Mansfield of Waterville emerged from Family Dollar with laundry detergent. She said she had worked all night doing private hospice care and stopped at the store purely for convenience, as she was tired and did not want to drive to a larger store.
Another customer, Brittany Parmenter of Waterville said she works at the Save-A-Lot discount grocery also located in The Concourse and shops frequently at both dollar stores.
“I think it’s pretty cool because I like both places,” Parmenter said and continued, “I live close by and it’s convenient and I am sure that goes for a lot of people, actually.”
The impact of the merger on Family Dollar and Dollar Tree stores located in close proximity, such as the two outlets in The Concourse, was not immediately clear.
Family Dollar stores in Augusta and Brewer were already scheduled for closing.
A spokesman for Family Dollar said in an email Monday that the company decided to close the two stores because they were part of the 370 locations identified in April as underperforming in a company-wide review.
At the Augusta Family Dollar store, more than half of the shelves were empty Monday afternoon. The manager of the store, Mavis Libby, said the store has been liquidating its inventory for about a month.
She said she didn’t find out about the planned merger with Dollar Tree, which has a location next door to her store, until a customer told her Monday morning.
“It’s crazy. It really is,” Libby said.
A person from the Family Dollar in Brewer, the only other store in Maine currently scheduled to close, called the Augusta location Monday, asking if a Dollar Tree location was also nearby.
Libby, 61, of Augusta, said she and another employee will be transferring to the Gardiner store. The third employee at the Augusta location can’t transfer because she doesn’t have transportation, Libby said.
An employee at the Brewer location, reached by phone, referred questions to the corporate headquarters in Charlotte, N.C.
Waterville City Planner Ann Beverage said she is not sure whether plans to build another Family Dollar store, on Kennedy Memorial Drive, is still in the works.
Mac Simpson of Hunt Real Estate, of Tampa, Fla., came before the city’s Planning Board May 12 for an informal pre-application review for a Family Dollar store on KMD, but no votes were taken, Beverage said.
“They were going to come back to the board, but they hadn’t set a date,” she said.
A call to Simpson for comment Monday afternoon was not immediately returned.
While the fate of individual stores is unknown, the Dollar Tree news release said the merger would achieve an estimated $300 million in annual cost savings by the end of the third year.
The acquisition of Family Dollar by Dollar Tree has been approved by the boards of directors for each chain, and now needs shareholder approval. The value of the transaction is $74.50 per share, a 22.8 percent premium over Family Dollar’s closing price as of July 15, according to a Dollar General release. At the closing, scheduled for early 2015, Family Dollar shareholders will receive $59.60 in cash and $14.90 equivalent in Dollar Tree shares.
The deal still needs the approval of Family Dollar shareholders, which includes investor Carl Icahn, who has built up a stake in the company of more than 9 percent, according to regulatory filings. Based on the prices he paid for his shares, Icahn, who has been sharply critical of Family Dollar management, stands to make nearly $200 million from the deal.
Executives with the two chains hailed the transaction.
Dollar Tree’s chief executive officer, Bob Sasser, called it a “transformational opportunity” in a news release: “With the acquisition of Family Dollar Stores, Dollar Tree will become a leading discount retailer in North America, with over 13,000 stores.”
Howard Levine, chairman and chief executive officer of Family Dollar, said the announcement “represents the successful culmination of a comprehensive strategic review process.”
For dollar store shoppers in central Maine, the transformation and strategic review will focus on their shopping habits.
Holding plastic shopping bags from both Family Dollar and Dollar Tree in Augusta, Shirley Ritz, 54, said Monday she was sorry to hear the store would be closing. She said she shopped at both dollar stores for different purchases. Family Dollar had the best selection of clothing, especially men’s clothing, Ritz said.
“What I don’t find here, I usually go there,” she said, pointing at Family Dollar.
Ritz, of Augusta, said she feels bad for the workers at the closing store.
“It’s a great store. It’s just sad,” she said.
Material from The Associated Press was used in this report.
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