Dollar General Up 10% On Family Dollar Bid, Upgrades By 3 Analysts
Dollar General was upgraded Monday to Buy in three separate calls at Credit Suisse, Sterne Agee and Deutsche Bank. All are betting that Dollar General will prevail in a bidding war with Dollar Tree (NASDAQ: DLTR), which earlier this month offered $8.5 billion.
The market appeared to agree Monday, with Dollar Tree off more than two percent.
Deutsche Bank's Paul Trussell boosted his target on Dollar General to $69, from $60.
"Our math of the combination is very attractive," Trussell said in a research note. He believes "the likelihood is high" that Dollar General will prevail in its objective, given the state of its balance sheet relative to Dollar Tree.
Estimated synergies by year three of the plan as outlined by Dollar General amount to $550 to $600 million, or about twice the savings contemplated by Dollar Tree's proposed merger, Trussell noted.
Trussell said risks to the deal include a possible further bid from Dollar Tree, cuts in so-called food stamps hurting core customers, and increasing competition from Wal-Mart and drug stores.
Latest Ratings for DG
|Dec 2014||Citigroup||Initiates Coverage on||Buy|
|Dec 2014||Credit Suisse||Maintains||Outperform|
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