While the $6.4 billion retailer hasn’t had much good news for shareholders lately, bets against the stock reached a record low last week, according to Markit data compiled by Bloomberg. That’s because investors are expecting an acquirer or activist to swoop in, said Wedbush Inc. It also helps that the hedge funds run by billionaires Nelson Peltz and John Paulson are two of the three biggest investors, and Peltz’s firm has a seat on the board.
Family Dollar has been buoyed by takeover speculation since Peltz made an unsolicited bid in 2011 in an attempt to attract other suitors. None surfaced. Chief Executive Officer Howard Levine was also reluctant to sell the company his father founded. Since then, competition has increased and Family Dollar said last week it will conduct a business review as analysts predict a 14 percent drop in 2014 profit. Pressure is building on Levine, and there’s still a chance buyout firms will step in or shareholder activism will pick up, Edward Jones & Co. said.
“The ice has got to be getting thinner underneath his skate,” Brian Yarbrough, a St. Louis-based analyst at Edward Jones, said in a phone interview. “A lot of times you’ll see private equity take an interest in some of these broken businesses, so you can’t rule it out.” Reports Bloomberg.
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