NEW YORK (TheStreet) -- Dollar General araisedathe stakes in its competing bid for Family Dollar , offering $80 a share in cash and major antitrust concessions that may force the two discount retailers to the negotiating table after a one-month standoff. Dollar General said Tuesday it would increase its takeover bid for Family Dollar, while also offering two major concessions: a $500 million reverse termination fee in the event antitrust regulators nix the deal, and a promise to divest up to 1,500 stores if the Federal Trade Commission orders the company to do so. Read More: The Ball is in Dollar General’s Court That higher bid, combined with significant antitrust concessions, may force Family Dollar to the negotiating table. Family Dollar has so far rejected Dollar General's attempts at a merger, instead recommending investors support a $74.50 a share cash and stock offer from Dollar Tree , which comes with lower antitrust hurdles and has the support of CEO Howard Levine and hedge fund Trian Management, who own a combined 16% of the company's outstanding shares. Trian, an activist hedge fund with a seat on Family Dollar's board, has raised concerns about the antitrust risks ofaa merger with Dollar General. It will be interesting to see if Dollar General's reverse termination fee and its agreement to divest up to 1,500 stores changes Trian's opinion. Previously, Dollar General had offered Family Dollar shareholders $78 a share in cash and a promise to divest up to 700 stores, an offer Family Dollar and its board found insufficient to break its existing deal with Dollar Tree. Dollar General also said it added law firm Boies, Schiller & Flexner to its review of antitrust work. Already, the company had relied upon Simpson Thatcher & Bartlett and economist Compass Lexecon to do its antitrust analysis. Breaking A Dollar Deal If Family Dollar breaks its deal with Dollar Tree, the company will be on the hook to pay a $305 million termination fee. That move may also create a bidding war between Dollar General and Dollar Tree for Family Dollar. Analysts generally believe Dollar Tree can pay north of $80 a share for Family Dollar given the expected synergy of a merger, but that Dollar General may be able to pay nearly $90 a share given annual synergies forecast at between $550 million and $600 million within three years of a deal's close. WATCH: More market update videos on TheStreet TV Antitrust or Operational Improvement? While Family Dollar and Dollar General are direct price competitors and do operate in many of the same geographies, S&P Capital IQ equity analyst Efraim Levy said he believes a merger between the two companies would be about increasing operational performance, and not removing a competitor from the market. Dollar General CEO Rick Dreiling said on a Thursday conference call with analysts he believes 20% of those synergies would come from better category management, with another 40% coming from procurement and merchandising synergies and a remaining 40% coming from reductions to the combined company's sales, general and administrative expense. In recent quarters, Family Dollar has earned nearly $55 in sales per square foot, over 15% more than what Family Dollar earns per square foot across its more thana8,000 stores. Some analysts believe that gap in performance is indicative of structural issues like Family Dollar's high exposure to urban markets. However, implicit in Dollar General's synergy guidance is the assumption it can operate legacy Family Dollar stores more effectively, potentially closing theagap between both companies.. Ultimately, antitrust may prove a weak defense for Family Dollar as it continues to recommend a merger with Dollar Tree to its shareholders. Watch for the response of key shareholders such as Trian Management as to whether Dollar General’s latest bid is a credible effort. Read More: Family Dollar's Lost Way Leads to Peltz and Icahn -- Written by Antoine Gara in New York Follow @AntoineGara
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