Family Dollar Stores Inc. shareholder Nelson Peltz withdrew his $7.7 billion offer to buy the discount retailer and instead placed an ally on its board to work on increasing the company’s value.
Edward P. Garden, chief investment officer of Peltz’s Trian Fund Management LP, will join Family Dollar’s board, which has been expanded to 11 directors, the Matthews, North Carolina- based retailer said today in a statement.
Trian, which owns 8.3 percent of Family Dollar, said the second-largest U.S. dollar store chain’s shares still are undervalued and that Garden will work “constructively” with the company’s management. Trian also agreed to limit its ownership to 9.9 percent and vote for Family Dollar’s board nominees, the fund said today in a filing.
“Trian is now more firmly wedded to the company,” John Heinbockel, an analyst at Guggenheim Securities LLC in New York, said today in a note to clients. He recommends buying Family Dollar shares and he expects Trian’s “positive influence” on the retailer to continue.
Trian offered on Feb. 15 to buy Family Dollar for $55 to $60 a share, or as much as $7.7 billion including net debt. The retailer rejected the offer less than a month later and adopted a defense to discourage unsolicited offers. Trian urged Family Dollar to reconsider, saying its plan to spur growth with new stores and remodeling didn’t address sales and profit margins that trailed larger rival Dollar General Corp.
Family Dollar said yesterday it plans to open as many as 500 stores next year to accelerate sales growth.
Joshua Braverman, a Family Dollar spokesman, didn’t immediately reply to a telephone message seeking comment. Trian won’t comment beyond its filing, said Carrie Bloom, a spokeswoman.
Family Dollar fell $1.52, or 2.9 percent, to $51.79 at 10:07 a.m. in New York Stock Exchange composite trading. The shares had gained 7.2 percent this year before today.
© Copyright 2014 Bloomberg News. All rights reserved.