Family Dollar Stores Inc. on Thursday said its board rejected a takeover bid by an activist investor, saying it "substantially undervalues the company."
The discount retailer also adopted a shareholder rights plan, commonly called a "poison pill," that would significantly dilute shares if a takeover attempt proceeds.
Nelson Peltz's Trian Fund in February offered $55 to $60 per share, or about $6.99 billion, for Family Dollar.
Peltz, Family Dollar's largest shareholder, started increasing his stake in the company last summer, saying the stock was undervalued. He said he met with senior management to discuss the company's direction. The Trian Fund bought more Family Dollar shares in January.
Trian owns large stakes in a variety of major American businesses including upscale jeweler Tiffany's & Co., food company H.J. Heinz Co. and fast-food chain Wendy's/Arby's Group Inc. It owns about 8 percent of Family Dollar shares.
Family Dollar's board said that pursuit of a sale is not in the best interests of shareholders, and that the best way to deliver value to shareholders is to continue implementing the company's strategic plan announced in September.
Howard Levine, chairman and CEO, said the results from its fiscal year reflect its strategic plan. "We have accelerated new store openings, launched an ambitious, multi-year store renovation program, and invested to improve our operational capabilities," he said in a statement.
He also noted that Family Dollar's board increased the company's quarterly dividend in January and has approved a $750 million share repurchase program. As of March 2, the company had repurchased $400 million shares.
"Family Dollar is executing effectively on its business plan and has a proven record of delivering superior results for shareholders," said Levine.
Family Dollar has more than 6,800 stores in 44 states. It benefited during the recession from penny-pinching consumers eager for deals. In its latest fiscal year, Family Dollar's net income rose 23 percent to $358.1 million, or $2.62 per share, on revenue of $7.87 billion.