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Updated: Mon, 18 Aug 2014 16:21:34 GMT | By CBC News, cbc.ca

Dollar General trumps Dollar Tree with $9.7B bid for Family Dollar



FILE - In this Wednesday, Sept. 25, 2013, file photo, customers exit a Dollar General store, in San Antonio. There�s now a bidding war for Family Dollar, with Dollar General offering about $9.7 billion for the discounter in an effort to trump Dollar Tree�s bid of $8.5 billion. (© AP Photo/Eric Gay, File)

FILE - In this Wednesday, Sept. 25, 2013, file photo, customers exit a Dollar General store, in San Antonio. There�s now a bidding war for Family Dollar, with Dollar General offering about $9.7 billion for the discounter in an effort to trump Dollar Tree�s bid of $8.5 billion. (AP Photo/Eric Gay, File) Eric Gay/Associated Press

There's big money one the lower end of the retail landscape as two U.S. dollar stores are competing to take over a third with bids nearings $10 billion.

Dollar General Corp. announced Monday it wants to buy rival chain Family Dollar for $9.7 billion. That's a higher price than an existing offer on the table for Family Dollar, one put out a while ago by Dollar Tree.

The latest bid is a three per cent premium to where shares in Family Dollar were trading on Friday. That price is itself up substantially from where the shares were before Dollar Tree came calling.

Family Dollar is a takeover target because the Charlotte, N.C. company has been shuttering stores and cutting prices of late. In June, investor Carl Icahn urged the company to put itself up for sale.

Dollar General and Family Dollar sells products that cost as low as $1, but also sells some things that cost more. Dollar Tree, however, only sells items that cost $1.

Dollar General's offer would create a retail juggernaut with 20,000 stores in 46 U.S. states, and combined sales of more than $28 billion. 

The dollar-store space is proving to be one of the bright spots for profitability in U.S. retailing.

Shops in the so-called "middle class" of retail that cater to average family homes have seen their sales slump as shoppers find cheaper and cheaper options for cheaply-made products they use and replace. But they also don't have the brand loyalty and fat profit margins of higher-end retail names.

Wal-Mart, the world's largest retailer, has acknowledged the trend by upping its offerings of products sold for around $1 — even if it means losing money on some items just to get a customer in the door. Kroger Co. also recently announced plans to expand the number of its smaller stores, which compete directly with dollar stores in many towns.

But dollar stores aren't just resting on their laurels, as they have increasingly offered food items and other brand-name products to draw shoppers in.

Shares of Dollar General stock climbed 11 per cent to close at $64.14. Family Dollar's stock gained 5 per cent to close at $79.81. Shares of Dollar Tree fell 2 per cent to $54.26.

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