Billion Dollar Bidding War

Dollar General offers $9.7 billion for Family Dollar stores.
5:02 | 08/18/14

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Transcript for Billion Dollar Bidding War
-- I'm -- -- New York as a financial markets close on Wall Street for today Monday August 18. It's a story stock. Today a look at the fortunes of Dollar General discs after the cut price merchandise chain be -- nine point seven billion dollars. To -- Family Dollar Stores. Here to track down all these dollars stores and huge amounts of money involved -- -- put on by -- asterisk on this Monday. So I'm Mike this is just the latest billion dollar offer for Family -- -- agree to a merger with. Another dollar store dollar tree just last month so where does this Dollar General -- -- Welcomes it a bit higher than the existing dollar tree off for about 5% higher -- tape so dollar general's offering close to nine point seven billion dollars -- you include debt that's all. In cash by the way. Whereas dollar tree was offering about nine point two billion dollars. And that was in cash and stock Dollar General is the biggest of the Big Three dollar -- dollar store chains and dollar tree. -- the smallest of the three so. The Dollar General as buyers story actually makes a lot more intuitive sense they were considered to be. The most likely buyer a Family Dollar after that company was kind of pushed almost to sell itself by activist investor Carl Icahn and others who thought that it was mismanaged. And could be worth more and other companies hands. -- -- with a premium on that well how exactly that did investors react to this plan. -- -- -- -- -- of Dollar General the the potential acquirer here. Has seen its shares go up close to 12% today that's some morning usual a lot of times -- a company decides to write a big check for another company. Its shares go down as people worry about the expense in the challenge of integrating the companies. But in fact I think people like this idea that dollar general's going to be to consolidate -- and the the undisputed giant in this area. What they were facing before if the dollar -- Family Dollar deal goes through is really potentially a stronger and number two competitor so this seems as if it's. Arguably the best management team and a dollar store business -- Dollar General being the consolidators and non Family Dollar shares didn't go higher. Interestingly they're trading a bit above. The stated value of the new bid which is 78 dollars and fifty cents a share. That means that traders on Wall Street -- handicapping there. Likelihood that there could be a higher bid coming in different dollar tree when Dollar General if they sit down with Family Dollar getting a higher -- who knows. If there's another party out there that wants to pay more so it seems as if people are thinking there's some momentum that is being content. Let's not discount the value if you will of these dollars stores because strength in numbers right in fact of if you look at Dollar General. Family Dollar that kind of a combo. -- -- with 20000 stores nationwide. And predicted 28 billion dollars a year in revenue. It's a different market -- say like the wal marts the targets of the place correct. It's it is a largely different market and you know in fact. Really it's been one of the biggest challenges to the wal -- of the world is -- smaller format dollar stores that kind of you know stuck -- any kind of strip mall or any opening. Off on main drag in any town and they start selling these cut rates goods now I I think the one thing to keep a -- had a -- -- today about this. If there's a good possibility that the dollar stores themselves as a category. Might be challenged to grow very much from here they really did feast. Aren't a lot of the economic trends the recession post recession period when you had incomes lagging and the absolute lowest price sort of -- Now we have Wal-Mart and others included Wal-Mart target gonna have smaller format stores you have their convenience store -- you have the drugstore chains everybody's fighting over the same customer. And I think that's one reason that Wall Street -- they did get in these companies to gather he gets some efficiencies -- you might be better competitor. Now that -- perhaps the low hanging fruit in this sector has been clocked. It was speaking -- thirty continued on to the tree then what is dollar tree what's there expects a response to all of this official is going to be you know or. It's unclear at this point now don't know they have it an agreement on paper say they are the incumbent so to speak in terms of the buyer. But you know the board of directors apparently dollars -- -- say we have a -- there with -- Dollar General on the table we have to consider potentially negotiate with them and break. The dollar tree DL and where that leads dollar tree is a big question of the smallest of the three they don't really have as much financial wherewithal to kind of take this bidding -- too much far there. So it's not clear what their future would be as an independent company aside from just business as usual so this is what kind of makes -- interest and and you know a lot of people are criticizing Wal-Mart I'll just say that for not deciding to go big and buy up one of the dollar change. And who knows if that's and out for dollar tree down the road. Not -- the latency but says look from Yahoo! finance on this Monday Mike thanks so much appreciate it okay. Thank you very much in stores stock -- -- with for latest headlines Dan Butler New York.

This transcript has been automatically generated and may not be 100% accurate.

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