Photograph by Ben Torres — Bloomberg via Getty Images
By John Kell
January 22, 2015

Family Dollar’s shareholders have overwhelmingly approved a $8.5 billion takeover bid by rival discount chain Dollar Tree, a vote that sidelines Dollar General’s competing offer.

At the vote held in North Carolina, investors holding 74% of Family Dollar’s total outstanding shares voted in favor of the proposal, an outcome that Chairman and CEO Howard Levine praised. The merger still requires approval from the Federal Trade Commission, and that could come as soon as March.

The discount-retail sector has been the subject of a complicated and drawn out love triangle that has made headlines since July, when Dollar Tree (DLTR) initially made a play for Family Dollar in a cash-and-stock deal. But rival Dollar General swooped in with a competing offer, saying it would pay $80 per share for Family Dollar (FDO) while Dollar Tree has stuck with its original $74.50 cash-and-stock offer.

While the Dollar General (DG) offer guarantees a higher price paid to shareholders, the vote ultimately asked investors to consider the growth potential of a merged Family Dollar-Dollar Tree (if they are willing to stick with their investment) over the long term.

Dollar Tree also lauded the outcome, while Dollar General was unsurprisingly disappointed.

“Today’s vote is a loss not only for Family Dollar shareholders, but also for consumers across the country who will not have the opportunity to benefit from the cost savings and efficiencies that we believe would have been created by a merger between Dollar General and Family Dollar,” said Rick Dreiling, Dollar General’s CEO and chairman.

The Dollar Tree bid also comes with fewer headaches, as the merged company would need to unload far fewer stores than if Dollar General had been successful, with divestitures needed from both proposals to win backing from the FTC.

Investors were finally persuaded the Dollar Tree deal was the right course to pursue. The Family Dollar vote had been postponed at one point because there hadn’t been enough votes to adopt the Dollar Tree merger, which Family Dollar has backed since the beginning. Since then, two influential shareholder advisory firms — Institutional Shareholder Services and Glass Lewis — have thrown their support behind the Dollar Tree bid.

Dollar Tree’s offer was a roughly 23% premium over Family Dollar’s trading price at the time the offer was officially made. The combined company will generate annual sales of about $18 billion, putting it slightly above Dollar General and making it a larger rival to Wal-Mart (WMT ) and other stores that sell goods at low prices. Dollar Tree sells everything in its stores for $1 or less, while Family Dollar has multiple price points to court value-conscious shoppers.

While the Family Dollar winner had remained in doubt for months, one clear winner was activist investor Carl Icahn. Icahn last year called on Family Dollar to put itself up for sale immediately, and at one point held a 9.4% stake in the company. He scored a reported $200 million profit on his investment when a bidding war broke out shortly after he lamented the retailer’s underperformance.

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