Dollar General (DG) Bullish Stance Reiterated at BofA/Merrill Lynch on FDO Bid; PT Raised to $73

BofA/Merrill Lynch analyst Denise Chai 'firmly' reiterated a Buy rating and lifted her price target on Dollar General (NYSE: DG) to $73.00 (from $66.00) amid the proposal to acquire Family Dollar (NYSE: FDO) for $78.50. The analyst views a deal as 'transformative' and highly accretive to earnings.

The analyst notes that a combined entity would have nearly 20,000 stores and generate sales of over $28 billion. Also the company estimates cost synergies of $550-600mn on an annual run-rate three years post-closing. Importantly, Rick Dreiling has agreed to postpone his previously-announced retirement to remain Chairman and CEO of the combined company until May 2016, the analyst also highlighted.

Chai views a counter bid from Dollar Tree (NASDAQ: DLTR) as unlikely and as a resulted upgraded shares of DLTR to Buy.

For an analyst ratings summary and ratings history on Dollar General click here. For more ratings news on Dollar General click here.

Shares of Dollar General closed at $57.46 yesterday.

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