(Reuters) - Dollar General Corp (N:DG) extended its tender offer for shares of Family Dollar Stores Inc (N:FDO) to Dec. 31, until after a shareholder vote that will decide the fate of a rival bid by Dollar Tree Inc (O:DLTR).
Dollar General had received offers for only about 4 million Family Dollar shares of a total 114 million outstanding shares as of Oct. 30, a day before the offer was to expire.
Dollar General's perseverance to close a deal highlights its struggles in a weak economy where penny-pinching customers look for more discounts and deals.
Dollar stores have been a popular choice for such customers, but rising competition from mass retailers such as Wal-Mart Stores Inc (N:WMT) and Target Corp (N:TGT) opening small-format stores has intensified pressure on them to merge.
Dollar General, the biggest U.S. discount chain, turned hostile and took its $80-per-share bid for Family Dollar directly to shareholders after being spurned twice over anti-trust concerns.
Family Dollar instead opted for a lower cash-and-stock deal from Dollar Tree Inc (O:DLTR) of $74.50 per share, on which it will hold a shareholder vote on Dec. 11.
Stifel Nicolaus & Co analyst Taylor Labarr said Dollar General's decision to extend the tender offer was to allow Family Dollar shareholders time to make a decision after the special meeting.
"They (Dollar General) extended the offer through the end of the year, that covers them through the shareholder vote, which I think is the key thing," Labarr said.
"It's giving cover for FDO shareholders to reject the Dollar Tree deal and still be able to tender for the offer with Dollar General," he added.
Dollar General and Family Dollar's shares were largely unchanged in afternoon trading. Dollar Tree shares were up 1.9 percent at $60.71. Earlier in the day, its shares rose as much as 2 percent to a record high of $61.00.
(Reporting by Siddharth Cavale in Bangalore; Editing by Tresa Sherin Morera)