Exclusive - Icahn says Family Dollar wasting over $300 mln in breakup fees

By Jennifer Ablan

NEW YORK (Reuters) - Billionaire activist investor Carl Icahn told Reuters late Monday that efforts by Family Dollar's board to fend off competing bids in favor of a deal with Dollar Tree have resulted in more than $300 million being needlessly spent on breakup fees.

Icahn has pushed Family Dollar to sell itself to Dollar General and has been openly critical of Family Dollar Chief Executive Howard Levine, who would have retained his position after an acquisition by Dollar Tree.

On Monday, Dollar General offered to buy Family Dollar Stores for $8.9 billion, trumping an agreed-to merger with its rival Dollar Tree and aiming to strengthen its dominance of a growing segment of retailers serving penny-pinching customers.

Dollar General has also offered to pay the $305 million breakup fee that would be owed to Dollar Tree if its deal with Family Dollar were to fall apart.

"This is a quintessential example and a reflection of what is wrong with Corporate America," Icahn said. "The Family Dollar board is wasting more than $300 million (in breakup fees to Dollar Tree) in an attempt to chill a competing bid from Dollar General, which would keep Howard Levine out of the company once and for all even though the Dollar General bid would enhance the value of Family Dollar stock."

Icahn, who in June took a 9.4 percent stake in Family Dollar, had encouraged Family Dollar to sell itself to Dollar General. On Monday, Icahn said he was "surprised" by Family Dollar's deal with Dollar Tree and questioned whether Levine's future role at Dollar Tree could have influenced the company to go ahead with the deal.

Dollar Tree said last month that Levine would remain as Family Dollar CEO after the acquisition.

Icahn has cut his stake in Family Dollar to 3.6 percent from 9.4 percent as of July 30.

In a regulatory filing in August, it was revealed that on June 6, Icahn telephoned Levine to discuss Icahn's stake in Family Dollar and to express an interest in additional communications with Family Dollar's management regarding the company's current operations and future plans, including potential strategic opportunities and business combination transactions.

According to the filing, Levine asked Icahn whether he would be willing to sign a non-disclosure agreement and Icahn declined.

"It appears that Levine and Family Dollar wanted to neutralize me by getting me to sign a confidentiality agreement," Icahn said. "If Levine and Family Dollar had gotten me to sign it, that would have kept me from doing a proxy fight and in my opinion this would have given Levine 2-3 more years to mismanage the company and keep a competing bid from materializing. I refused to sign the confidentiality agreement."

Icahn said: "In my humble opinion, Family Dollar would still be in the hands of Levine and the board if it had not been for my activism."

Company officials at Family Dollar were not available for comment.

(Reporting By Jennifer Ablan; Editing by Meredith Mazzilli)