(Adds background, analysts' comments)
By Shailaja Sharma and Sruthi Ramakrishnan
June 27 Dollar General Corp said CEO Rick
Dreiling will retire next year, throwing into doubt a proposal
by Carl Icahn to merge the discount retailer with Family Dollar
Dollar General's shares fell as much as 8 percent and Family
Dollar's as much as 4 percent in morning trading on Friday.
Both companies face increasing competition from big-box
retailers such as Wal-Mart Stores Inc that are also
competing for business from low-income families, who themselves
have been hit by cuts in benefits such as food stamps.
Icahn said earlier this month he was considering pushing
Family Dollar to sell itself to Dollar General to help the
companies cope with intensifying competition.
The departure of Dreiling, 60, who has been chief executive
since January 2008, throws a wrench into Icahn's proposal,
"We think it is very unlikely Dreiling's eventual successor
would be inclined to immediately risk his or her legacy by
making a very large and transformative acquisition early in
their tenure," said BB&T Capital Markets analyst Anthony
Chukumba wrote in a note to clients.
Sterne Agee & Leach analyst Charles Grom said the recent
promotion of Todd Vasos to chief operating officer from head of
merchandising suggested the company has a succession plan.
Dollar General had been a chronic underperformer before
Dreiling took over and is now the clear leader among U.S.
deep-discount retailers, Chukumba said.
Under Dreiling's leadership, Dollar General's annual sales
increased by more than 80 percent to $17.5 billion in 2013 and
its store count increased by 38 percent to more than 11,000, the
"Rick Dreiling is a legend in the grocery and dollar space
and one of the most highly respected CEOs out there, so losing
him is clearly a negative for the company," FBR Capital Markets
analyst Dutch Fox, who also sees Vasos as a likely CEO, told
Dollar General's share price has nearly tripled since the
company was listed on the New York Stock Exchange in November
Dreiling, who has also been chairman since December 2008,
will continue in that role during a transition period following
the appointment of a new CEO, the company said on Friday.
Dollar General said its board would conduct an internal and
external search for a new CEO. Dreiling will stay on as CEO
until May 30, 2015 or until the appointment of a successor.
The company's shares were down 6.5 percent at $57.64 at
midday. Up to Thursday's close, Dollar General's shares had
risen 6.3 percent since Icahn, who holds about 9.39 percent of
Family Dollar, pushed the idea of a merger.
As of Thursday, Dollar General had a market value of $18.71
billion, while Family Dollar was valued at about $7.7 billion.
(Reporting by Shailaja Sharma in Bangalore; Editing by