When Dollar Tree battled Dollar General for the affections and assets of Family Dollar in 2014 and won, it sold more than 300 stores to a new company called Dollar Express in order to satisfy federal regulators. Fast forward to today: Dollar Express sold itself to former suitor Dollar General, and it’s suing Dollar Tree, claiming that it’s partly to blame for its failure.
Back in 2014 when Dollar Tree’s acquisition of Family Dollar went through, the company sold off 330 stores to a new chain, Dollar Express. The Federal Trade Commission required this sale, or divestiture, to keep any one company from controlling too much of the discount store market in areas where the two chains overlapped too much.
But then this spring, Dollar Express announced it would be selling its stores to Dollar General because it could “no longer operate as a viable standalone business.”
The suit filed in Delaware last week explains Dollar Express’ reasons for why it had to dump those stores so quickly: Dollar Express said it was trying to get a good thing going, but was stymied by a “scheme to kill Dollar Express” allegedly perpetrated by Dollar Tree and Family Dollar, reports The Charlotte Observer.
It’s accusing Dollar Tree and Family Dollar of purposely sabotaging the stores that were sold to Dollar Express by placing unqualified workers in those locations. It also claims the company used confidential information to open new Family Dollar stores super close to Dollar Express stores and thus, cut into its profits.
The shutdown of Dollar Express will result in almost 3,000 workers losing their jobs.
“Had Dollar Express known defendants’ true intentions, Dollar Express never would have purchased the stores,” the suit reads. “Similarly, defendants’ false representations enabled them to obtain the pre-merger approvals from the (Federal Trade Commission) required to consummate the merger.”
The lawsuit accuses Dollar Tree and Family Dollar of breach of contract, fraud, unfair competition and deceptive trade practices, among other allegations, and is seeking damages to be determined at trial.
“Dollar Express’s damages, which include the lost prospective value of the acquisition of the stores, may exceed one-half billion dollars, with the ultimate amount of damages to be determined at trial,” Dollar Express said in its complaint.
This isn’t the first time such a divestiture has failed: After Albertsons bought Safeway in 2015 and sold 168 stores to rival Haggen, Haggen filed for bankruptcy just months later. Advantage Rent a Car also went bankrupt within months of being divested by Hertz Global Holdings so it could buy Dollar Thrifty, notes Reuters.
by Mary Beth Quirk via Consumerist