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Dollar General Up 10% On Family Dollar Bid, Upgrades By 3 Analysts

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Dollar General (NYSE: DG) shares are up 9.75 percent Monday after it made an $8.9 billion offer for its smaller rival Family Dollar (NYSE: FDO).

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

DateFirmActionFromTo
Dec 2014CitigroupInitiates Coverage onBuy
Dec 2014BarclaysMaintainsEqual-weight
Dec 2014Credit SuisseMaintainsOutperform

View More Analyst Ratings for DG
View the Latest Analyst Ratings

Posted-In: Deutsche Bank Paul TrussellAnalyst Color News Price Target M&A Analyst Ratings

 

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