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Dollar Tree is buying rival discounter Family Dollar, giving it a wider reach in the intensifying fight for deal-seeking customers. But the impact locally of the deal is still unknown.
The $8.5 billion deal will give Dollar Tree more than 13,000 stores in the U.S. and Canada.
There are seven Family Dollar locations in Springfield, and another in Mechanicsburg, according to its website. The newest location was added in an under-served neighborhood on the corner of East Street and Selma Road in Springfield for approximately $1 million in 2012.
Dollar Tree has one location in Clark County, on North Bechtle Ave. in Springfield, and no locations in Champaign County. There are approximately 11 locations in the Dayton area, including stores in Huber Heights and Xenia.
Springfield officials are always concerned about retail stores closing, but they’re unsure what type of impact the Family Dollar sale will have on the area. Both Family Dollar and Dollar General have built several stores in the area of the last five years, said Tom Franzen, assistant city manager and director of economic development.
“Whenever there is a rapid build out like this, we usually expect some consolidation to happen at some point,” Franzen said.
The current leading discounter, Dollar General Corp., has more than 11,300 stores in the U.S., including 10 in Clark and Champaign counties. An 11th location is being planned on South Yellow Springs Street in Springfield.
Dollar stores have struggled as major retailers including Wal-Mart Stores Inc. and Kroger have stepped up their courtship of lower-income customers by opening smaller store formats that compete more directly with such discounters. Sales are also suffering because the lower-income customers who go to dollar stores still haven’t recovered from the recession and its aftermath because of persistent job instability and slow wage growth.
Family Dollar shuttered stores and cut prices as result, and had been conducting a strategic review since the winter. Last month, investor Carl Icahn urged the company to put itself up for sale. Icahn has built up a stake in the company of more than 9 percent, according to regulatory filings.
On Monday, Dollar Tree CEO Bob Sasser noted that his company and Family Dollar have different business models. While all items sold at Dollar Tree cost just a dollar, Family Dollar charges a broader range of prices, which allows it to sell a greater variety of items, including brand-name products such as Kraft cheese or Tide laundry soap.
As such, Sasser said the two chains “co-locate really well” and offer complementary merchandise.
The companies did not say if any Dollar Tree or Family Dollar stores would be closed. Dollar Tree will continue to operate under the existing Dollar Tree, Deals and Dollar Tree Canada store banners. It will keep the Family Dollar brand as well.
Including debt and other costs, the companies estimate the deal to be more than $9 billion. The boards of both companies have unanimously approved the deal, which is expected to close by early next year. It still needs approval from Family Dollar shareholders.
The Associated Press contributed to this report.
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