Finally, someone is going to make
deal with the disastrous acquisition of Family Dollar, and the stock looks better for it.
After Friday’s close, it was revealed that activist investor Mantle Ridge had bought a $ 1.8 billion position in the Dollar Tree stock, with the intention of getting the company to take action to increase the share price. Dollar Tree shares have risen around 45% over the past five years, while
has risen around 116%.
Mantle Ridge would like to see Dollar Tree make improvements to Family Dollar, which was acquired in 2015, and change its pricing strategy. Dollar Tree had already announced some changes in recent months, including plans to charge more than $ 1 for some products. “With a sudden change in strategy from the DLTR management in the middle of the quarter, there has been speculation about activist pressure behind the scenes,” writes Oppenheimer analyst Rupesh Parikh.
Parikh noted that Mantle Ridge’s purchase began in mid-September, but they began even earlier than that, according to a person familiar with the situation.
Reports suggest that former Dollar General CEO Rick Dreiling is working on Mantle Ridge, something JPMorgan analyst Matthew Boss calls a “potential game changer.” That probably helps explain why the Dollar Tree had risen 11% in the last three months, to the S&P 500’s 4.8% rise, and a further 14% at the end of Monday.
“The conclusion is that this development should mean that DLTR will now be held more responsible for producing consistent results,” writes UBS analyst Michael Lasser. “In this case, the upside potential of the shares is significant.”
Write to Ben Levisohn at email@example.com