Family Dollar Responds To Icahn With Poison Pill

Shares of Family Dollar FDO and Dollar General DG are flying higher after Carl Icahn Announced a 9.39 percent position in Family Dollar. Analysts across Wall Street are speculating on a merger between the firms; Jefferies speculates a deal could add $1.2 billion of synergies. Deutsche Bank, who is less optimistic about the completion of a deal, still thinks it is a serious possibility.

However, a merger is no where near an open and closed case. Management teams of the firms have been resistant to hedge fund activity in the past. In 2011 Nelson Peltz tried to buy Family Dollar for over $7 billion and take it private, but the company initiated a poison pill provision and fought against the purchase.

Related: Jefferies Thinks Family Dollar And Dollar General Merger Is Likely

Similar to the response to Peltz’s proposed takeover, Family Dollar has once again initiated a poison pill provision that will limit Icahn’s ownership at 10 percent. The press release announcing the poison pill states that it, “is not designed to prevent an offer to acquire the Company, but rather to allow the Board adequate time to consider any and all alternatives.” However, that language is typical for these kind of releases.

Although the poison pill indicates that Family Dollar will push back against Icahn, shares did not respond to the announcement. Family Dollar shares are currently up 15.88 percent from Friday’s close to $70.14. Dollar General shares are up 11.62 percent to $64.73.