In 1993, One Dollar Inc. officially changed its name to Dollar Tree. Dollar Tree is a leading discount variety store in the United States. Their inventory is priced at one dollar including food, toys, housewares, cleaning supplies, beauty aids, paper products and many other odds and ends. Dollar Tree is able to offer its customers a wide variety of products for just one dollar because of its purchasing power. The company buys products in huge quantities. Dollar Tree imports roughly 40 percent of its stock, purchases manufacturers’ overage and maintains a strong focus on controlling costs.
However, Dollar Tree recently announced an $8.5 billion acquisition. The figure rose to $10 billion due to stock prices soaring. Dollar Tree agreed to divest 330 Family Dollar stores to private-equity firm Sycamore Partners. The combined organization will operate more than 13,000 stores in 48 states forecasting sales exceeding $19 billion annually. Dollar Tree anticipates the deal will result in an estimated $300 million of annual run-rate by the end of the mergers third year.
Again, the merger levels the playing field for competition with a large retail store, Walmart. The dollar concept is once again gaining popularity in the U.S. due to changing shopping patterns. Dollar stores’ convenient locations give them a competitive edge over traditional Wal-Mart stores, which are usually located on the outskirts of cities. The retail giant has also ramped up its own small store expansion, which could be one of the reasons to have prompted Dollar Tree to buy its counterpart.
As a single company, Dollar Tree-Family Dollar is at a much better position to compete against Wal-Mart. The merger is expected to create cost alliance at a $300 million run rate by the end of 2018, which can help the dollar chain pass on some savings to its customers. With competitive prices, Dollar