Dollar Tree is selling Family Dollar to two private equity firms for $1 billion after spending nearly a decade trying to integrate the discount chain into its operations.
In 2015, Dollar Tree acquired Family Dollar for over $8 billion following a bidding war with Dollar General. However, managing director of GlobalData Neil Saunders stated that Dollar Tree faced difficulties after the acquisition, including supply chain issues, subpar store locations, and other operational challenges.
“Essentially, Dollar Tree took on more than it could handle,” Saunders commented.
Last year, Dollar Tree revealed plans to close hundreds of Family Dollar locations.
After exploring various options, Dollar Tree announced on Wednesday that the sale to Brigade Capital Management and Macellum Capital Management would allow it to refocus on its core business.
Mike Creedon, who became the permanent CEO of Dollar Tree late last year, called the sale of Family Dollar “a major milestone in our multi-year transformation journey to help us fully achieve our potential.”
Discount retailers like Dollar Tree, which have raised prices in recent years, are facing limited flexibility as American consumers tighten their spending due to declining confidence in the economy.
After its sale to Dollar Tree, Family Dollar relocated its headquarters from North Carolina to Chesapeake, Virginia, and will continue to operate from Virginia.
Jonathan Duskin, CEO and Partner of Macellum, stated that the deal offers a unique chance to play a significant role in revitalizing a well-known business.
Neil Saunders noted that Brigade and Macellum will face several challenges at Family Dollar, including pricing that lags behind competitors and a less loyal customer base.
The transaction is expected to be finalized later in the second quarter.
Dollar Tree’s shares saw a slight increase when the market opened.