Dollar Tree Sells Family Dollar to Private Equity Firms

Family Dollar is being kicked out of the Dollar Tree family.

Dollar Tree is selling the brand to private equity firms Brigade Capital Management and Macellum Capital Management for approximately $1 billion, the Wall Street Journal reported. Dollar Tree retained bankers over the summer to conduct a strategic review of Family Dollar, which it acquired in 2015 for $9 billion.

Both of the private equity firms involved in the Family Dollar acquisition have made real estate pushes with other retailers. Macellum was among the activist investors pushing Kohl’s to reduce its real estate holdings, while Brigade and Arkhouse Management tried to buy out Macy’s and take it private.

Family Dollar will keep its headquarters in Chesapeake, Virginia. The acquisition is expected to close in the second quarter.

For Dollar Tree, the sale is designed to allow the retailer to unlock more of its potential value. Chief executive officer Michael Creedon said in a press release announcing the transaction that the company will have an “enhanced focus on compelling initiatives, including our expanded assortment, significant planned new store openings across the United States, and transactions that advance our growth strategy.”

Last month, Dollar Tree successfully bid on 148 leases owned by Party City, easily the top bidder for the bevy of vacant real estate spaces that came to market.

The buyers of Family Dollar mentioned a strategic plan for the future of the brand, but didn’t make specific comments about stores or real estate. That may be significant, considering Dollar Tree was a year removed from announcing the closure of 1,000 stores, mostly under the Family Dollar umbrella. Inflation and store theft were among the reasons cited for the closures.

Dollar Tree typically caters to the middle-income, suburban household, highlighting products such as party supplies or knick-knacks. Family Dollar, on the other hand, is geared more towards urban markets, selling groceries and other essential items.

Shares of Dollar Tree have fallen roughly 10 percent this year; as of Tuesday, its market value was slightly below $15 billion. As of February, the company counts 16,500 stores in North America.

— Holden Walter-Warner