Carl Icahn's move to acquire a 9.4% stake in
Family Dollar Stores Inc.
) pushed the discount store retailer to adopt a one-year
shareholder right plan - better known as poison pill - to prevent
activist investors from completely taking it over. The step taken
by this Matthews, NC-based company to prevent any hostile takeovers
triggered a momentum that led the stock to surge 13.4% yesterday to
close at $68.62.
The shareholder right plan will be exercisable only when a
person or group acquires 10% of the company's common stock. The
poison pill got the support of all the directors, except Edward
Garden who did not favor the move.
After taking on bellwethers like
) in the past couple of years, Icahn now targets Family Dollar and
is likely to push the company's management to implement strategic
changes. This billionaire activist investor is in favor of a merger
between Family Dollar and
Dollar General Corporation
). Shares of Dollar General rose 7.4% to $62.25 yesterday.
Family Dollar has been in troubled waters for sometime now. The
soft economic recovery and increasing competition from other big
brick and mortar retailers along with online giants has affected
sales and profitability. The company posted a 6.1% decline in sales
and a 6.7% drop in gross margin for the second quarter of fiscal
Consequently, Family Dollar announced a number of measures to
improve its operational and financial performances. Management
intends to reduce prices of 1,000 basic items, optimize cost
structure by reducing headcount and close 370 underperforming
outlets. It also plans to be more rational on new store opening to
reap higher return on investment.
Notably, the company's cautious stance on store openings is in
stark contrast to Dollar General, which is on a store expansion
drive. Dollar general intends to open about 700 new stores in
Currently, Family Dollar holds a Zacks Rank #5 (Strong Sell),
while Dollar General carries Zacks Rank #3 (Hold).
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