March 3, 2011
Dollar's toothless defense
The ink on the Airgas opinion has barely dried and Family Dollar looks like it's trying to use the Just Say No defense to stave off an offer by Nelson Peltz. Peltz announced his offer to the world in a recent 13d filing:
On February 15, 2011, the Trian Group contacted Howard Levine, Chairman of the Board and Chief Executive Officer of the Issuer, and advised him that it beneficially owned approximately 8% of the outstanding Shares and believed that it was the largest beneficial owner of Shares. The Trian Group also advised Mr. Levine that it proposed that the Trian Group or one of its affiliates acquire the Issuer at a price in the range of $55 to $60 per Share in cash.
The Family Dollar board considered the offer and responded (Form 8-K):
by a unanimous vote of those present, determined that continued implementation of the Company’s strategic plan remains the best way to deliver value to all Family Dollar shareholders. The Board also determined that the unsolicited, conditional proposal from Trian Group to acquire Family Dollar substantially undervalues the Company and that pursuit of a sale of the Company is not in the best interest of shareholders.
The Family Dollar board also adopted a shareholder rights plan. It's an imperfect defense, though. Family Dollar's board is elected annually. It does have a 90 day advance notice provision in its bylaws for nominations, but no classified board. The effectiveness of the rights plan as a defensive measure comes from the combination of the pill and the classified board. Family Dollar is going with just the pill and not the staggered board. I guess we'll soon see how that works for them.
Update: The Deal Professor tweets (Steven Davidoff has a Twitter account - @StevenDavidoff) that the 10% threshold on Family Dollar's pill might be more about keeping away hedge funds than Peltz. He's probably right because without a staggered board the pill isn't doing much else.
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