Family Dollar Stores Inc. (FDO) on Thursday rejected a hostile takeover offer from billionaire investor Nelson Peltz, Family Dollar’s largest shareholder, saying the bid “substantially undervalues the company.”
The Matthews, North Carolina-based discount retailer also adopted a shareholder rights plan with a one-year term, commonly called a “poison pill,” that would significantly dilute shares in the event of a takeover attempt. This would reduce the likelihood that an outside group would gain control of the co. without its consent. In addition, such plans increase the cost of taking over a business.
Peltz, who owns roughly 8% of FDO shares, offered $55 to $60 per share in cash Feb. 15 for Family Dollar, valuing the company at up to $7.8 billion. FDO shares, which have been trading at a premium to rivals Dollar Tree Inc (DLTR) and Dollar General Corp (DG), had fallen seven of the ten days since Peltz’s offer through yesterday, signaling investors were skeptical about the bid. Peltz, who rarely buys entire companies, had not lined up financing.
Family Dollar gained 37 cents, or 0.75%, to $50.77 at 1:07 p.m. in New York Stock Exchange composite trading.