Dollar Tree Inc. has announced its decision to divest its Family Dollar brand to Brigade Capital Management and Macellum Capital Management for slightly more than $1 billion. This sale price signifies a significant decrease in value, considering Dollar Tree originally purchased Family Dollar for approximately $9.2 billion in 2015.

Transaction Details

The transaction is anticipated to be completed in the second quarter of the year, subject to regular closing conditions and regulatory approvals, as stated in a company press release.

In the announcement, Dollar Tree highlighted the potential benefits of this move for its shareholders and emphasized its commitment to ensuring a prosperous future for Family Dollar.

Statements from Dollar Tree Leadership

Mike Creedon, CEO of Dollar Tree, remarked on the sale, describing it as a critical step in their multi-year transformation initiative. “This is a major milestone in our multi-year transformation journey to help us fully achieve our potential,” he stated.

Creedon also emphasized the company’s intention to enhance the Dollar Tree business to deliver greater value for associates, customers, and shareholders, alongside a focus on “compelling initiatives.”

Market Reactions

Following the announcement, Dollar Tree’s stock experienced a notable increase, indicating positive investor sentiment towards the divestiture. An analyst from GlobalData Retail viewed the sale as a closure to a challenging era for Dollar Tree, remarking, “Dollar Tree bit off far more than it could chew.”

The acquisition aimed to broaden the customer base for both brands, yet Dollar Tree faced substantial challenges in managing the operations of both entities effectively.

Challenges Faced by Dollar Tree

Prior to this transaction, Dollar Tree had already begun to reduce its Family Dollar locations, announcing a closure of approximately 1,000 stores earlier last year. This decision was part of broader efforts to combat rising inflation and issues related to theft.

About the Buyers

Brigade Capital Management, founded in 2006, manages over $27 billion in assets globally. Its partner in this acquisition, Macellum Capital Management, established in 2009, specializes in investing in undervalued businesses.

Jonathan Duskin, CEO and partner at Macellum, expressed enthusiasm for the transaction, stating, “This transaction presented a unique opportunity to play a key role in reinvigorating an iconic business.” He emphasized their readiness to implement a strategic plan developed in collaboration with Brigade.