There were echoes of trouble for dollar store franchise Family Dollar back in April, and talks of an impending buyout.
On Monday it was announced that rival franchise Dollar Tree would be buying Family Dollar.
Dollar Tree is said to have acquired the floundering company for about eight and a half billion dollars, although it’s believed that the deal could actually be worth well over nine billion.
There are a number of questions being asked as this event sends shock waves throughout the dollar store industry.
Many observers are curious as to what will happen to the Family Dollar Brand. It’s not unusual for the rival to acquire a franchise, and then change the names of the old stores to their own.
— WATE 6 News (@6News) July 28, 2014
This would be somewhat difficult to pull off for Dollar Tree, which operates in a much different manner from Family Dollar.
It’s known far and wide that everything in a Dollar Tree store is $1 or less. However, Family Dollar stores have items ranging in price.
Dollar Tree has stated that it expects to operate Family Dollar as its own brand, separately from the Dollar Tree, Dollar Tree Canada, and Deals brands.
— Businessweek (@BW) July 28, 2014
This is a situation where the boards for both companies are very enthusiastic about the deal.
Though the shareholders at Family Dollar still have to approve the deal for things to be finalized, the rise in stock prices for both Dollar Tree and Family Dollar should help bring them around.
Dollar Tree shares jumped ten percent to reach a value of $59.72 and Family Dollar shares jumped by nearly $15 dollars to $75.55.
— WEWS NewsChannel5 (@WEWS) July 28, 2014
Even with the positive early outlook, it’s likely Dollar Tree will have make adjustments.
The dollar store industry faces stiff competition from companies like Walmart, which has gone after lower income shoppers and those still feeling the effects of the recession.
Image via Wikimedia Commons