Dollar General (NYSE:DG) has made a strong counter to Dollar Tree, Inc. (NASDAQ:DLTR)’s month-old offer for Family Dollar Stores, Inc. (NYSE:FDO), but the intensifying battle for the discount retailer is not over just yet, according to Courtney Reagan in a segment on CNBC’s Squawk on the Street this morning.


As Reagan explained, Dollar General (NYSE:DG)’s offer of $78.50 in cash per share, and $550 to $600 million in cost synergies is clearly superior to the offer made by Dollar Tree back in July, which amounted to $74.50 per share in stock and cash, and just $300 million in cost synergies.

The combined company would also be much larger, given Dollar General (NYSE:DG)’s current market leader, with 20,000 stores and $28 billion in sales, compared to 13,000 and $18 billion with a Dollar Tree merger. However, it’s far more than just the offer and the size of the combined outfit that could make the Dollar General (NYSE:DG) offer more attractive to Family Dollar.

“Now Wall Street has long thought a Dollar General/Family Dollar combination makes the most sense on many levels, including comparable store formats, similar customers […] And on a conference call this morning Dreiling [Dollar General Chairman and CEO Rick Dreiling] said that it’s too early to discuss branding, but that he believes Family Dollar stores would end up looking a lot like Dollar General,” Reagan said.

Despite that, Reagan points out that Dollar General (NYSE:DG) must wait and see how Family Dollar responds, whether or not Dollar Tree muddies the waters further by making a counter offer of their own that is more competitive than their existing one, and finally, what the FTC may have to say about such a merger.

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