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Activist Starboard urges Dollar Tree to sell Family Dollar, rejig board


(Reuters) - Activist investor LP on Monday called on Inc to explore a sale of its underperforming business and nominated directors to replace a majority of its board after revealing a stake in the company.

Starboard said its stake in the was 1.7 percent or worth about $370 million, making it one of the largest shareholders in the company.

"We believe should explore all strategic alternatives for Family Dollar, including a sale of the business," Starboard said in a letter addressed to

The retailer bought in 2015 for about $8.5 billion in a bid to fend off growing competition from and fellow discounter

However, close proximity to certain Dollar General and Walmart stores as well as a growing shift to led to sluggish same-store sales growth and a nearly 15 percent decline in the company's stock price last year.

A sale of would likely fetch less than the price Dollar Tree paid for the business, Starboard said, but still urged investors and the management to back a sale for the struggling chain.

"The market is likely only ascribing approximately $1 billion - $3 billion of value to Family Dollar based on the current stock price," Smith said.

Starboard said it was also seeking to replace seven directors on the retailer's 12-member board, effectively giving it majority control.

Dollar Tree, however, said its board was equipped with the right "skills and perspectives" to make its business a success, especially after adding four new independent directors since May 2016.

The company also said that Starboard's nominations came out of the blue without any prior engagement or communication.

The activist investor also urged the company to explore and implement a multiple-price point strategy that would be above the $1.00 ceiling, which Dollar Tree has maintained since its founding thirty years ago.

Starboard said that Dollar Tree's existing price ceiling has restricted it from offering better quality products, while having multiple price points have worked in favor of rivals Dollar General and Canada's Dollarama Inc.

"We believe that Dollar Tree is deeply undervalued and significant opportunities exist to create value," Starboard said.

(Reporting by in Bengaluru; Editing by Shinjini Ganguli)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Mon, January 07 2019. 18:49 IST