Dollar Tree sells family dollars to private equity firms after trying to find the right decade

After a decade, the company sold household dollars to a pair of private equity firms for $1 billion and tried to acquire cheap chains.

After a bidding war with rival Dollar General, it acquired family dollars for more than $8 billion in 2015.

GlobalData managing director Neil Saunders said after acquiring rival chain stores, U.S. Tree struggled with supply chain issues, poor locations and other difficulties in operating.

“Basically, the dollar tree bites a lot more than it chews,” he said.

Last year, the Dollar Tree announced plans to close hundreds of home dollar stores.

Dollar Tree has been searching for home dollar options for some time and said Wednesday that the sale to Travel Capital Management and Macellum Capital Management will allow it to focus on its core business.

“This is a major milestone in our years of transformation journey that can help us reach our full potential,” said Mike Creedon, permanent CEO who became Dollar Tree late last year.

During the call, Creedon noted that the dollar tree and the household dollar were “two different businesses with limited synergy.” He added that the sale will allow everyone to focus on their specific needs.

Truist Securities analyst Scot Ciccarelli agrees.

“Family dollar turnover efforts have been consuming a lot of management focus and financial resources, and now the company can focus all efforts on planting and optimizing the dollar tree,” he wrote in a client note.

In recent years, bargaining chains such as Dollar Tree have found them to have little room. Americans have tightened their spending on consumer confidence in the economic downturn.

After the sale to Dollar Tree, the family’s headquarters moved its headquarters from North Carolina to Chesapeake, Virginia, and will maintain its headquarters in Virginia.

“This deal provides a unique opportunity to play a key role in revitalizing the iconic business,” said Jonathan Duskin, CEO and partner of Macellum.

Sanders said the brigade and Messalem had to solve several issues on the family dollar, including prices not as sharp as many of its competitors and less loyal customer base.

The deal is expected to close later in the second quarter.

Shares of the Dollar Tree rose 2.8% in midday trading.

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