Dollar Tree/Family Dollar Merger Could Rival Walmart

An $8.5 billion merger creating North America's biggest dollar store chain could mean increased competition for mass discounters such as Wal-Mart Stores Inc. but less choice for shoppers.

In the Baltimore area and elsewhere, retail experts said, Dollar Tree Inc.'s planned purchase of Family Dollar Stores Inc., announced Monday, likely will lead to some store closings, though the companies have not identified any locations.

Dollar Tree, which runs mostly suburban stores and sells a mix of consumables as well as items such as gifts, party goods and greeting cards for $1 or less, has about 55 stores in the Baltimore area. Most are scattered throughout Anne Arundel, Baltimore, Carroll, Cecil, Harford and Howard counties, with only about a half-dozen in Baltimore City.

Family Dollar, which mostly sells lower-margin consumables such as food and household products priced between $1 to $5 and targets urban shoppers in lower-income neighborhoods, has 26 stores in Baltimore City and about 16 others in the region.

The deal would give Dollar Tree more than 13,000 stores in 48 states and Canada and more than $18 billion in sales, vaulting the chain ahead of larger rival Dollar General Corp., which has 11,338 U.S. stores and reported sales of $17.5 billion in its latest fiscal year.

It also would help the dollar variety stores be more competitive with big-box chains such as Wal-Mart, which have gone after cash-strapped consumers by offering more items priced at $1 or less.

If the proposed merger is completed, as planned, by early next year, it would be a win for both companies' shareholders but may be a loss for consumers, experts said. Shares of Family Dollar climbed nearly 25 percent to $75.74 Monday, higher than the $74.50 per share offer from Dollar Tree, perhaps in anticipation of a competing offer. Dollar Tree shares were up 1.2 percent at $54.87.

"Mergers by companies in the same consumer retail business are generally not good for the consumer," said Jerry Reisman, a partner in the law firm of Reisman Peirez Reisman & Capobianco in Garden City, N.Y., and a mergers and acquisitions financing expert. "It diminishes competition, and it's competition that drives prices down. If we have fewer retailers in the same price category, we're going to find that those dollar prices maintained by the Dollar Tree may no longer be just that — a dollar."