Private equity firms Apollo Global Management and Sycamore Partners, along with investment firm Brigade Capital Management, are competing to acquire Family Dollar, a discount retail chain operated by Dollar Tree, as reported by sources familiar with the matter.
These sources, who requested anonymity due to the confidential nature of the discussions, indicated that a deal valuing Family Dollar at billions of dollars is under consideration. However, they cautioned that Dollar Tree may choose not to proceed with a sale, leaving room for other potential suitors to emerge.
Following this news, Dollar Tree's shares surged over 5% on Thursday before partially retracting. Dollar Tree did not respond to requests for comment, while Apollo, Brigade, and Sycamore declined to provide statements.
Based in Chesapeake, Virginia, Dollar Tree has been collaborating with JPMorgan Chase since last June to evaluate options for Family Dollar, including a potential sale or spinoff. This strategic shift comes after Dollar Tree's acquisition of Family Dollar in 2015 for approximately $9 billion, outbidding its major competitor, Dollar General.
Family Dollar has encountered challenges post-acquisition, with its growth stagnating and performance trailing behind larger retailers such as Walmart and Target. The company's inability to attract new customers, combined with consumer spending cutbacks due to high inflation, has contributed to these difficulties.
Operating under the brands Dollar Tree, Family Dollar, and Dollar Tree Canada, Dollar Tree currently oversees 16,590 stores across 48 states and five Canadian provinces. Family Dollar generated an estimated $13.7 billion in net revenue in the past year, according to Reuters calculations.
Sycamore, known for its retail investments in Staples, Loft, Ann Taylor, Talbots, and Belk, and Apollo Global Management, with investments in Michaels and PetSmart among others, are well-positioned contenders in the acquisition race. Brigade Capital, recognized primarily as a credit investor, teamed up with Arkhouse Management last year to acquire department store Macy's.