NEW YORK (Reuters) - Trian Group has accused Family Dollar Stores Inc’s FDO.N board of “poor corporate governance” for adopting an anti-takeover “poison pill” and said it could quickly line up billions of dollars to make good on its rebuffed offer to buy the company.
Family Dollar adopted a shareholder rights plan on March 3, when it rejected an offer from billionaire investor Nelson Peltz’s Trian Group to buy Family Dollar for $55 to $60 per share in cash.
The board reiterated its position on Monday that the $7 billion offer “substantially undervalues” Family Dollar, whose Chief Executive Howard Levine is the son of the company’s founder.
In a letter to the Family Dollar board, filed with U.S. regulators on Monday, Trian disputed that notion, saying the retailer’s strategy to compete with Dollar General Corp (DG.N) was vague and insufficient.
Family Dollar shares rose 1.1 percent to $51.82 in afternoon trading.
A $55 per share offer would represent a 25 percent premium over the share price right before the offer was made on February 15.
Trian contends that even if Family Dollar does meet Wall Street’s performance forecasts in the next two and a half years, it will still be underperforming Dollar General.
Family Dollar, which sells most of items for $10 or less, caters to consumers with household incomes of $40,000 and below, earlier on Monday raised its second-quarter profit forecast, citing sales gains.
In a statement responding to Trian’s letter, Family Dollar said the new forecast “demonstrates that Family Dollar is executing well against its strategic plan.”
Trian wants Family Dollar’s board to commit to quickly matching Dollar General’s sales-per-square-foot performance even if it continues to rebuff Trian’s overture.
Trian also took issue with the poison pill’s threshold, which calls for flooding the market with shares if any one investor acquires a 10 percent stake, making a takeover difficult and costly.
It argued that the 10 percent trigger was below the 20 percent guideline set by shareholder advisory group Institutional Shareholder Services.
Trian, which said it and funds it controls own 8 percent of shares, making it Family Dollar’s largest shareholder, denied its offer was hostile and called on the board to immediately remove the poison pill.
Trian said it has held talks with lenders and is confident it could line up at least $5 billion in debt financing for a deal and pay cash for the rest.
Reporting by Phil Wahba; Editing by Tim Dobbyn