What Could Soon Happen to Family Dollar

Family Dollar is looking like the prettiest girl at the ball.

A Family Dollar store is seen on July 28, 2014 in Hollywood, Florida. Dollar Tree announced it will buy Family Dollar Stores for about $8.5 billion in cash and stock, but Dollar General butted in Monday, Aug. 18, with a $9.7 billion offer. (Joe Raedle/Getty Images)

On Monday, Dollar General floated a deal valued at nearly $10 billion in a bid to steal Family Dollar away from rival Dollar Tree, the New York Times reported.

The move came less than a month after Dollar Tree proposed its $8.5 billion takeover of Family Dollar.

The bidding war offers strong evidence that cheap goods are big business.

Dollar General's new deal offers an awful lot: The company would pay $78.50 per share in cash, compared to Dollar Tree's $74.50, as well paying the $305 million break-up fee that would be owed to Dollar Tree should Family Dollar back out.

As the Times noted, the combination of Dollar General and Family Dollar would be a bargain behemoth, with nearly 20,000 stores and $28 billion in annual revenue.

The combination of Dollar Tree and Family Dollar, on the other hand, would create a smaller, 13,000-store, $18 billion-a-year empire.

The announcement boosted stock prices for both Dollar General and Family Dollar, as Forbes noted, while the one-upped Dollar Tree's shares tumbled:

Following the announcement, shares of Dollar General were up 11.6% in pre-market trading to $64.10. Family Dollar shares were up 4.9% to $79.75. And Dollar Tree shares were down 1.5% to $54.80.

As the Times has previously reported, discount stores including Dollar General, Dollar Tree and Family Dollar have thrived in the years since the 2008 financial crisis as consumers spend more cautiously.

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