99 Cents Only Stores offer might not hold up

The stock is trading at $19.68 a share, which is higher than the offering price of $19.09 from L.A. private equity firm Leonard Green and the Shiffer/Gold family, whose members started the City of Commerce-based discount retailer. The higher stock price this morning means that investors are betting on a better bid than $19.09. Dollar stores became attractive properties during the recession as frugal consumers bypassed traditional supermarkets. They also generate consistent cash flow, which is what the private equity firms really like. Just last week, Family Dollar Stores rejected an unsolicited bid by Nelson Peltz's Trian Fund Management. Deal Journal's Shira Ovide notes that the 99 Cents offer is kind of tricky because family members bidding for the company and several family members serve as executives or board members. A company statement said that the offer was conditional and that the board had not yet considered it.

Back in 2002, Debbie Belgum, then at the Business Journal, interviewed founder David Gold about how it all works:

Son of Russian immigrants, he still reports to his City of Commerce office every day between 4 a.m. and 5 a.m. (the best time to get things done before the chaos begins, he says). He and his wife have lived in the same house for 38 years, and he has just turned in his 1993 Oldsmobile for a Toyota Prius, a hybrid car that gets great gas mileage. Plus, at a time when executive compensation abuses have become standard-issue, Gold is content with a relatively modest salary of $181,000 in 2001, up from $168,000 the year before. He has not received a bonus in the last three years. "We have enough already. I'm overpaid," he says.