Dollar Tree is nearing a sale of its Family Dollar business to a consortium of private-equity investors for roughly $1 billion, according to people familiar with the matter. 

The shares jumped 5.6% in premarket trading.

The details

The discount-retail chain is set to be acquired by Brigade Capital Management and Macellum Capital Management, the people said. A deal is expected to be announced later Wednesday morning, when Dollar Tree reports its quarterly results, they added. 

The Wall Street Journal reported last summer that Dollar Tree, in the midst of a turnaround, had tapped bankers to conduct a strategic review of its Family Dollar division.

Though the two names sound familiar and are known for selling cut-rate merchandise, they serve different consumers. Dollar Tree stores are mostly in suburban locations and cater to middle-income households seeking party supplies, crafts or other knickknacks. (Dollar Tree historically sold most items at $1, though recently it has boosted some prices.) 

Family Dollar locations are more concentrated in urban areas, and sell groceries, cleaning products and other essential items at various price points. 

Dollar Tree outbid its rival Dollar General to acquire the Family Dollar chain in 2015 for roughly $9 billion. 

Dollar Tree shares are down about 10% so far this year, giving it a market value of a little less than $15 billion. 

The context 

Since the deal, the Family Dollar business has struggled to grow and been a heavy investment lift.

Dollar Tree had already started down the path of slimming it down. In early 2024, it said it would close roughly 1,000 Family Dollar locations as the business battled inflation and store theft, among other industry challenges. 

In December, Dollar Tree raised its full-year sales guidance in light of strong third-quarter results. The company also appointed Michael Creedon as its permanent chief executive officer and recently named a new chief financial officer to take over at the end of this month. 

Selling Family Dollar should allow Dollar Tree to invest for more growth and keep making bets, research analysts have said. For instance, it last year acquired leases for a group of 99 Cents Only Stores.