Introduction
The merger between Dollar Tree, Inc. and Family Dollar, Inc. has brought about a wide array of challenges for both companies considering that it did not provide a straightforward approach to the merger as may have been expected. Dollar Tree, Inc., which had remained keen on the merger with Family Dollar, Inc., encountered stiff challenges for other companies that intended to move ahead with a similar merger. That meant that although Dollar Tree, Inc. was working towards gathering as much information as possible concerning the merger, the challenge remained that other companies were also working on a similar course of action. The outcome of this is that it exposed a wide array of legal and ethical implications for both companies in their bid to create a merger that they would both accept and appreciate as part of the legal standings.
Important Facts on the Merger
An article published within the New York Times reported on the fact that Dollar General Corporation and Family Dollar, Inc. were working on a merger that would see both companies integrate into one corporation that would operating within legal confines (de la Merced, 2014). In a meeting held between the two companies on June 19, 2014, Dollar General Corporation declared their non-interest in a merger with Family Dollar, Inc. attributed to a disagreement on the terms of the merger. That meant that Dollar General Corporation would not move ahead with the merger. However, both Dollar General Corporation and Family Dollar, Inc. filed merger information with the Security Exchange Commission (SEC) on the same date, June 19, 2014. The filing of the merger information meant that the companies were seeking alternative approaches towards working towards finding an agreement that would result in a merger.
Delegate your assignment to our experts and they will do the rest.
On its part, Dollar General Corporation embarked on a bidding war for the Family Dollar Stores within different parts of the United States regardless of its non-interest in a merger. Initially, Dollar Tree, Inc. offered a sum of $8.9 million to complete the merger with Family Dollar, Inc., which is a sum that the latter rejected. However, Family Dollar, Inc. moved ahead with a merger with Dollar Tree, Inc. for $8.5 million. According to some of the key reasons given for the purpose for rejection of the offer presented by Dollar General Corporation, Family Dollar Inc. indicated that there were a wide array of antitrust issues and concern raised in the agreement between the two companies. That sought to suggest that it would be challenging for the two companies to work within the same legal confines as part of maximizing on their capacities to build on their profitability.
Legal Implications of the Merger
The main legal implication that can be seen from the merger between Dollar Tree, Inc. and Family Dollar, Inc. revolves around possible antitrust regulations, which creates the need for the Federal Trade Commission to open an investigation into the merger. According to the primary analysis of the merger by the Federal Trade Commission, it was clear that the merger brought forward several antitrust violations regarding a Horizontal Merger (Federal Trade Commission, 2019). That acted as the primary reason as to why it was important for the commission to embark on a merger that would seek to determine whether the antitrust policies had been violated as part of the agreement that had been signed between the two parties.
The Federal Trade Commission’s docket number for the investigation carried out on the merger between Dollar Tree, Inc. and Family Dollar, Inc. is C-4530, which is dated July 2, 2015 (Federal Trade Commission, 2019). The primary expectation for the Federal Trade Commission was that this would serve as one of the ways through which to create a standard avenue through which to determine whether both parties followed the merger guidelines set for a Horizontal Merger. A Horizontal Merger is a type of merger that focuses on companies or corporations that operate within the same competitive environment (Yan, Fu, Oum, & Wang, 2019). In this case, Dollar Tree, Inc. and Family Dollar, Inc. operate with the same competitive environment, which meant that they were bound by the merger guidelines disseminated by the Antitrust Division of the United States Department of Justice (DOJ). The two corporations were expected to put in place legal guidelines that would allow them to maintain their competitive capacity.
On the other hand, the merger between Dollar Tree, Inc. and Family Dollar, Inc. also brought about a legal implication touching on securities class action lawsuit that had been filed by the stockholders for Family Dollar, Inc. One of the critical questions that had been raised as part of the lawsuit was on the number of stocks that each of the stockholders would get from the merger. According to the agreement that had been signed between the two companies, stockholders of Family Dollar, Inc. were expected to receive $59.60 in form of cash for the stocks that they held at Family Dollar and a further $14.90 for the shares that they would hold at Dollar Tree, Inc (Battea - Class Action Services, 2015). However, the stockholders were not happy with the total from the pricing of their stocks.
Legal Analysis of the Merger
From a legal perspective, it must be noted that the merger between Dollar Tree, Inc. and Family Dollar, Inc. ought to be viewed as going against the set out merger guidelines touching on a Horizontal Merger. That can be seen from the fact that both corporations had agreed with a third party, Sycamore Partners, where they would sell 330 Family Dollar Stores. That goes against the set guidelines of a Horizontal Merger focusing on the antitrust laws that have been put in place to maintain a positive yet competitive environment. In the case of Dollar Tree, Inc. and Family Dollar, Inc., the merger was expected to create an anticompetitive environment considering that they had focused more on trying to establish an advantage for the company resulting from the merger.
Business Plan Action
Dollar Tree, Inc., which is a critical party in the merger, ought to reconsider the terms of agreement for the merger considering that this would work as one of the ways through which to avoid legal exposure. That means that the company should focus on creating terms of the merger that would conform to the conditions set out within the merger guidelines disseminated by the Antitrust Division of the United States Department of Justice (DOJ). That would help towards limiting legal exposure for the company in terms of the possibility of legal action if it would seek to move forward with the merger.
Change the Law/Precedent?
The antitrust laws should be changed in a manner that it would represent the interests of parties that seek to engage in a merger within the same competitive environment. That can be seen from the fact that having strict antitrust laws means that most of the companies find themselves at a disadvantage after they have embarked on a merger. It becomes hard for them to maintain adequate performance considering that they do not have the legal requisites that would allow them to maintain their competitive advantage.
References
Battea - Class Action Services. (2015). Family Dollar Stores receives securities class action lawsuit . Retrieved from https://www.battea.com/family-dollar-stores-receives-securities-class-action-lawsuit/
De la Merced, M. J. (2014). Family Dollar Rejects Takeover Bid by Dollar General, Citing Antitrust Concerns . Retrieved from https://dealbook.nytimes.com/2014/08/21/family-dollar-rejects-takeover-bid-by-dollar-general/
Federal Trade Commission. (2019). Dollar Tree, Inc./Family Dollar Stores, Inc., File Number: 141 0207/ Civil Action Number C-4530 (The Federal Trade Commission September 16, 2015) . Retrieved from https://www.ftc.gov/enforcement/cases-proceedings/141-0207/dollar-tree-incfamily-dollarstores-inc
Federal Trade Commission. (2019). Federal Trade Commission, The Antitrust Laws . Retrieved from https://www.ftc.gov/tips-advice/competition-guidance/guide-antitrustlaws/antitrust-laws
Yan, J., Fu, X., Oum, T. H., & Wang, K. (2019). Airline horizontal mergers and productivity: Empirical evidence from a quasi-natural experiment in China. International Journal of Industrial Organization , 62 , 358-376.
