Trian Group has accused Family Dollar Stores board of "poor corporate governance" for adopting an anti-takeover "poison pill" and said it could quickly line up billions of dollars to make good on its rebuffed offer to buy the company.
Mish Bradley
Family Dollar adopted a shareholder rights plan on March 3, when it rejected an offer from billionaire investor Nelson Peltz's Trian Group to buy Family Dollar for $55 to $60 per share in cash.
The board reiterated its position on Monday that the $7 billion offer "substantially undervalues" Family Dollar, whose Chief Executive Howard Levine is the son of the company's founder. A $55 per share offer would represent a 25 percent premium over the share price right before the offer was made on Feb. 15.
Family Dollar shares gained a quarter of a percent Monday on a day when U.S. stocks were broadly lower.
In a letter to the Family Dollar board, filed with U.S. regulators on Monday, Trian disputed the company, saying the retailer's strategy to compete with Dollar General was vague and insufficient.
The company, which sells most of items for $10 or less, caters to consumers with household incomes of $40,000 and below, earlier on Monday raised its second-quarter profit forecast, citing sales gains.
Family Dollar saw a 5.1 percent rise in December-February comparable sales and expects to earn 97-98 cents in the period. Total sales rose 8.3 percent to $2.26 billion. It had earlier forecast second-quarter earnings between 92-97 cents a share. Analysts, on average, were expecting it to earn 95 cents a share, according to Thomson Reuters I/B/E/S.
Although January sales were hurt by winter storms, February revenue benefited from early spring-like weather. Sales during the quarter were strongest in the Consumable and Seasonal categories, the company said.
In a statement responding to Trian's letter, Family Dollar said the new forecast "demonstrates that Family Dollar is executing well against its strategic plan."
Trian wants Family Dollar's board to commit to quickly matching Dollar General's sales-per-square-foot performance even if it continues to rebuff Trian's overture.
Trian also took issue with the poison pill's threshold, which calls for flooding the market with shares if any one investor acquires a 10 percent stake, making a takeover difficult and costly.
It argued that the 10 percent trigger was below the 20 percent guideline set by shareholder advisory group Institutional Shareholder Services.
Trian, which said it and funds it controls own 8 percent of shares, making it Family Dollar's largest shareholder, denied that its offer was hostile and called on the board to immediately remove the poison pill.
Trian said it has held talks with lenders and is confident it could line up at least $5 billion in debt financing for a deal and pay cash for the rest.