Dollar General would get $12.3 billion of debt for Family Dollar bid

By Sara Rosenberg

New York, Aug. 18 – Dollar General is proposing to acquire Family Dollar Stores Inc. for $78.50 per share in cash in a transaction valued at $9.7 billion and has received a commitment for $12.3 billion in debt to fund the purchase, according to an 8-K filed with the Securities and Exchange Commission on Monday.

The debt financing is expected to include a revolver, term loans and notes.

Goldman Sachs Bank USA and Citigroup Global Markets Inc. provided the debt commitment.

The company’s pro forma adjusted debt to last-12-months EBITDAR would be 5.5 times, and the expectation is that it will return to an investment-grade credit profile three years after closing.

Family Dollar has already agreed to be acquired by Dollar Tree Inc. for $74.50 per share, comprised of $59.60 in cash and $14.90 in Dollar Tree stock, subject to a collar.

According to Dollar General, its all-cash proposal of $78.50 per share would provide Family Dollar shareholders with a substantially superior valuation to the $74.50 per share cash/stock offer announced by Dollar Tree.

The financing commitment obtained by Dollar General provides funds for the acquisition as well as for estimated fees and expenses, including the $305 million termination fee payable to Dollar Tree in the event Family Dollar terminates the existing merger agreement to enter into a merger agreement with Dollar General.

As previously reported, Dollar Tree is planning to fund the purchase of Family Dollar with a $6.65 billion credit facility split between a $1.25 billion revolver and a $5.4 billion term loan, a $2.8 billion senior unsecured bridge loan led by the same banks, which is expected to be replaced through the issuance of senior unsecured notes or other debt securities, $569 million of balance sheet cash and $240 million of revolver borrowings.

J.P. Morgan Securities LLC, Wells Fargo Bank NA, Bank of America NA, Royal Bank of Canada and U.S. Bank NA are the leads on the Dollar Tree debt financing.

Dollar Tree expects to be able to close on the Family Dollar acquisition by early 2015 and have leverage of 4.4 times and adjusted debt-to-EBITDAR leverage of 5.6 times at closing.

Dollar General is a Goodlettsville, Tenn.-based discount retailer. Family Dollar is a Matthews, N.C.-based chain of discount stores. Dollar Tree is a Chesapeake, Va.-based discount store operator.

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