Family Dollar Stores, Inc. (NYSE:FDO) Investor Files Lawsuit Against Acquisition By Dollar Tree

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Company Name(s): 
Family Dollar Stores
Case Name: 
Family Dollar Stores Deal Case 08/08/2014
Case Status: 
Lawsuit Filed
Affected Securities
Lawsuit Overview
Type of Lawsuit: 
Mergers and Acquisition
Date Filed: 

August 8, 2014 (Shareholders Foundation) - An investor, who currently holds shares of Family Dollar Stores, Inc. (NYSE:FDO) filed a lawsuit in effort to halt the proposed takeover of Family Dollar Stores, Inc. by Dollar Tree, Inc at a value of $74.50 per share.

The plaintiff alleges that the defendants breached their fiduciary duties owed to NYSE:FDO stockholders by agreeing to sell Family Dollar Stores, Inc.. too cheaply via an unfair process to Dollar Tree, Inc

On July 28, 2014, Dollar Tree, Inc. (NASDAQ:DLTR) and Family Dollar Stores, Inc. (NYSE:FDO), announced that they have entered into a merger agreement under which Dollar Tree will acquire Family Dollar in a cash and stock transaction. Under the terms of the transaction, Family Dollar shareholders will receive $74.50 for each share they own, comprised of $59.60 in cash and $14.90 in Dollar Tree stock.

However, the plaintiff claims that the takeover undervalues Family Dollar Stores, Inc. Indeed, at least one analyst has set the high target price for NYSE:FDO shares at $79 per share and NYSE:FDO shares jumped following the takeover news in the open market to as high as $76.76 per share. Family Dollar Stores, Inc. reported that its Total Revenue rose from over $7.86 billion for the 52 weeks period that ended on August 28, 2010 to over $10.39 billion for the 53 weeks period that ended on August 31, 2013 and that its respective Net Income increased from $358.13 million to $443.57 million. Shares of Family Dollar Stores, Inc. (NYSE:FDO) grew from $15.90 per share in early 2008 to as high as $73.34 per share in September 2013.

In addition, the plaintiff alleges that the process is also unfair to NYSE:FDO investors. In fact, Howard R. Levine and Trian Fund Management, L.P. and funds managed by it, which collectively own approximately 16% of the outstanding stock of Family Dollar, have already entered into voting agreements in support of the merger.

On August 8, 2014, NYSE:FDO shares closed at $75.74 per share