Price Wars: The Fall of Dollar Stores | Billionaire Tug of War | 1

Summary

Business Wars: Price Wars - The Fall of Dollar Stores | Billionaire Tug of War | Episode 1

Host: David Brown
Release Date: April 2, 2025

Summary:

Business Wars delves into the intense competition among America’s leading dollar store chains—Dollar General, Family Dollar, and Dollar Tree—and the high-stakes battles that shape their destinies. In the inaugural episode, "Price Wars: The Fall of Dollar Stores | Billionaire Tug of War," host David Brown narrates the tumultuous journey of these discount retailers against the backdrop of economic challenges and strategic maneuvers by influential investors.

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1. The Struggles of the Everyday Shopper

The episode opens with a poignant portrayal of Mimi Jacobs, a single mother in Las Cruces, New Mexico, navigating the aisles of her local Family Dollar store. At [00:08], Mimi grips her son's hand tightly amidst the limited offerings and tight budget constraints:

Mimi Jacobs [00:18]: "No, no toys today. We're just getting a couple of things that we need."

This scene sets the stage, highlighting the essential role dollar stores play for low-income families relying on them for affordable necessities. However, it also underscores the inherent challenges these stores face in meeting customer needs effectively.

2. The Dollar Store Boom and Initial Challenges

As Mimi grapples with her budget, the narrative shifts to Wall Street, where investors are capitalizing on the booming dollar store industry. Dollar stores thrive during economic downturns, attracting the nation's poorest consumers. However, despite their success, looming questions about sustainability emerge:

Narrator [05:12]: "There are more than 38,000 dollar and variety stores in the US compared to just four and a half thousand Walmarts. But store counts can be misleading."

David Brown introduces the central dilemma: can these low-margin, high-volume retailers maintain their profitability amid rising inflation and the digital shopping revolution?

3. KKR’s Acquisition and Dollar General’s Resurgence

The spotlight turns to 2007 when private equity giant KKR acquired Dollar General for $7 billion. Michael Calvert of KKR is determined to revitalize the struggling chain. Enter Rick Driling, a seasoned retail executive who KKR believes can transform Dollar General. Driling's aggressive strategies include:

• Streamlining Inventory: Reducing underperforming product lines to maximize profit margins.

• Enhancing Core Offerings: Focusing on consumables like eggs and toilet paper to drive regular customer visits.

Rick Driling [03:02]: "We need to wring out maximum profit and efficiency from every square foot of our stores."

Under Driling’s leadership, Dollar General flourishes, leading KKR to exit with significant profits by 2013. This turnaround positions Dollar General as a formidable player in the dollar store market, sparking envy among rivals.

4. Trian Partners Targets Family Dollar

Witnessing KKR’s success with Dollar General, Trian Partners sets its sights on Family Dollar in 2011. Led by Leon Levine, Family Dollar was historically strong but began to falter due to poor inventory management and overexpansion. Trian’s strategy involves:

• Hostile Takeover Threats: Acquiring an 8% stake and pressuring Family Dollar to sell.

• Appointing New Leadership: Introducing Michael Bloom to implement deep discounting strategies.

Michael Bloom [19:12]: "Deep discounting works by raising core prices but offering huge discounts on selected items each week."

However, Bloom's approach clashes with Family Dollar’s customer base, leading to inefficiencies and declining sales.

5. The Arrival of Carl Icahn: A Hostile Takeover

Just as Family Dollar contemplates a merger with Dollar Tree, corporate raider Carl Icahn enters the fray by acquiring a significant stake. His aggressive tactics threaten the merger:

Carl Icahn [32:59]: "You haven't given up hope of reviving your family company? You’re not in charge anymore, Howard."

Icahn’s intervention causes turmoil, jeopardizing the Dollar Tree deal and forcing Family Dollar to navigate a precarious path between potential buyers.

6. The Final Showdown: Dollar Tree Acquires Family Dollar

Despite Icahn’s maneuvers, Family Dollar successfully merges with Dollar Tree in July 2014 for approximately $8.5 billion. This acquisition transforms the market dynamics:

• Market Expansion: The combined entity boasts over 13,000 stores, surpassing Walmart in store count.

• Competitive Pressure: Dollar General, with nearly 12,000 stores, responds by ramping up its expansion efforts, intensifying the competition.

Narrator [37:09]: "The combined company will have more than 13,000 stores in the US and Canada. That's nearly three times as many as Walmart."

7. Impact on Communities and Market Saturation

The aggressive expansion by Dollar General and the newly merged Dollar Tree-Family Dollar leads to market saturation, adversely affecting local businesses:

• Local Businesses Suffering: Small grocery stores struggle to compete, leading to closures and reduced community services.

• Limited Product Offerings: The focus on low-margin, non-perishable items limits consumer access to fresh foods and essential services.

Narrator [38:00]: "Many places have five or six dollar stores in a small area, making it difficult for local businesses to survive."

8. Regulatory Intervention and Market Consolidation

As the dollar store landscape becomes increasingly monopolized, regulatory bodies step in to prevent excessive market dominance:

Narrator [39:54]: "The Federal Trade Commission steps in, fearing that the merger would reduce competition significantly."

The FTC's decision to block Dollar General’s attempt to acquire Family Dollar forces the consolidation to remain with Dollar Tree, reshaping the competitive landscape.

9. Conclusion: A Dual Battle for Supremacy

With Dollar General and the Dollar Tree-Family Dollar conglomerate now at the forefront, the episode concludes by illustrating the relentless drive of dollar stores to outpace each other, raising concerns about their long-term impact on communities and the broader retail market.

Narrator [39:31]: "The battle among dollar retailers just became a little more expensive and threatens to get nasty."

David Brown wraps up the episode by setting the stage for future conflicts, including community pushbacks, digital competition, and the resilience of the dollar store model amidst rising inflation.

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Key Takeaways:

• Strategic Acquisitions: Private equity and investment firms play pivotal roles in shaping the fortunes of major retailers through acquisitions and strategic leadership changes.

• Competitive Tactics: Aggressive expansion and price strategies can lead to market saturation, impacting local economies and consumer choices.

• Regulatory Oversight: Antitrust regulations are crucial in maintaining competitive balance and preventing monopolistic dominance in the retail sector.

• Consumer Impact: While dollar stores provide affordable essentials, their proliferation raises questions about sustainability, community health, and economic equity.

Notable Quotes:

• Rick Driling [03:02]: "We need to wring out maximum profit and efficiency from every square foot of our stores."
  (Timestamp: 03:02)

• Carl Icahn [32:59]: "You haven't given up hope of reviving your family company? You’re not in charge anymore, Howard."
  (Timestamp: 32:59)

• Narrator [37:09]: "The combined company will have more than 13,000 stores in the US and Canada. That's nearly three times as many as Walmart."
  (Timestamp: 37:09)

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Credits:

• Story Written By: Judy Cooper of Yellow Ant
• Research By: David Wolinski
• Sound Design: Ryan Potesta
• Fact Checking: Gabrielle Jolais
• Voice Acting: Chloe Elmore
• Producers: Tristan Donovan, Emily Frost, Dave Schilling
• Executive Producers: Jenny Lauer Beckman, Marshall Louie

For more episodes and exclusive content, listen to Business Wars on the Wondery App or your preferred podcast platform.

Transcript

[Mimi Jacobs]

2014 Las Cruces, New Mexico Mimi Jacobs grabs hold of her 7 year old son's hand before he runs off through the aisles of their local Family Dollar store.

[Dylan]

No, no toys today. We're just getting a couple of things that we need.

[Mimi Jacobs]

Mimi checks the cash in her purse and grimaces at the few dollars that are left. She's got to survive on this until her next paycheck. They've run out of toilet paper and they've got nothing for dinner that night. She heads to the freezers and searches for something filling and cheap.

[Dylan]

Looks like it's frozen pizza again.

[Mimi Jacobs]

She heads down the rest of the narrow aisles, edging around the stock trolleys full of boxes that haven't yet been unpacked. She prefers Walmart. It has wide aisles, bright lighting, and neatly stocked shelves, but the nearest Walmart is 20 miles away. She can't afford the gas to get there until she gets paid, so she's grateful there's a store like this close to home. Family Dollar sells items in smaller sizes too, so she can get just enough to last until the next big shop. She ends up spending more in the long run, but it's the only way she can make the money last. She picks up a four pack of toilet paper. Price $2. As she puts it in her basket, she spots a red tag indicating a further 50% off some bars of soap. That should make it just a few cents. She sniffs at it and smiles at the thought that she might be able to have some nice smelling soap in the bathroom for once. Mimi waits in a long queue at the single checkout. When it's her turn, she anxiously watches as the soap is rung through. To her horror, it comes up as full price.

[Dylan]

No, that's a mistake. It had a sticker saying there was 50% off.

[Mimi Jacobs]

It's not coming up here. Sorry. Mimi feels her face turn bright red, conscious of the long line of shoppers behind her.

[Dylan]

Okay, well then take the soap off, please. Dylan, can you take the soap back to where it was for Mommy?

[Mimi Jacobs]

Her son obediently trots off with the soap while Mimi hands over the cash and tries not to cry. Just once she'd like to be able to buy something nice and not worry about the price. But as Mimi struggles through another week on Wall street, investors are sniffing profits in the air. Dollar stores are booming, reaping major profits on the back of a recession that never really ended for America's poorest. And now, in Manhattan's plush offices and swanky restaurants, a bidding war is breaking. Out over Family dollar in the dollar store bidding wars.

[Ryan]

Dollar General has just put up the largest stack of bills yet in an attempt to snatch up competitor family$9.7 billion to be exact.

[Mimi Jacobs]

It's a huge number for a business built on the smallest of margins. Billions are being bet on these companies ability to profit from the nation's neediest. But are these hot stocks built to last or will they crumble in the face of inflation and digital shopping?

[David Brown]

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[Mimi Jacobs]

From wondering I'm David Brown and this is business. You know it says something when the cost of living crisis gets so bad that even dollar stores are struggling. There are more than 38,000 dollar and variety stores in the US. That's compared to just four and a half thousand Walmarts. But store counts can be misleading. Back in 2024, Walmart stock rose 15%. And while $ stores watch their stock implode and stores get shut down, regional chains like the $0.99 Only Store and Bargain Hunt recently went bust. Ten years earlier, investors considered these value retailers sure bets for when times got tough. So what went wrong? How did dollar stores go from Wall street darlings to the problem children of the stock market? And can the strategies that made them America's most ubiquitous retailers still work in a post pandemic digital world dominated by rising inflation? This is episode one Billionaire Tug of War. It's fall 2007, and in Phoenix, Arizona, Michael Calvert is searching the aisles of a Dollar General. He's a partner at the private equity firm kkr, and his anxieties rising, he can't believe he's lost his companion in a store that's no bigger than two basketball courts. Calbert spots him near the freezers. This is the man he hopes will fix Dollar General. KKR spent $7 billion to buy the chain last year, and they've been looking for the right CEO ever since. Now, longtime listeners of Business wars might remember KKR from the Toys R Us vs. KB Toys season. They're one of the private equity firms who loaded Toys R Us with debt leading to its bankruptcy. KKR specializes in buying underperforming companies in the hope of fixing them quickly for a major profit. And in Dollar General's case, well, they need someone who knows retail inside and out. Calbert's pick is the guy standing by the freezers. His name is Rick Driling, a slim, neat man in his 50s with a shock of thick white hair. Dryling's not excited about the idea of running Dollar General, but Calbert's convinced him to do a tour of the company's stores anyhow. Dryling turns to Calbert with a frown. He holds a green Gatorade bottle in his hand. Where's the orange flavored Gatorade? Orange is the number two selling flavor, and there's not even a tag here, so they clearly don't stock it. Why would you stock the number three flavor instead of a number two? Calvert looks around for the store manager. Dollar General gives store managers plenty of discretion about what to order. It's possible this store manager simply doesn't like orange Gatorade. But Driling has already taken off into another aisle. He points to a clumsy stack of white plastic toilet seats. Unbelievable. Calpert is mystified. What about them? When was the last time you bought a toilet seat? I don't remember long Time ago. Exactly. And look at all the space they take up. Space that could be used for goods that actually sell. Calvert can't help but smile. You know, Dryling seems perfect. Just the kind of man who could turn Dollar general around. When KKR bought Dollar General in 2007, he was struggling. But it wasn't always this way. The first Dollar General opened in 1955 in Springfield, Kentucky. Its founders, J.L. turner and his son Cal, owned the local department store. And at the department store they used to hold dollar days to get rid of excess merchandise. These days proved so popular, the Turners decided it could be an all year business. They bought excess merchandise from other retailers and sold everything for a dollar. That first store became a sensation. Within the year, they'd opened a second in Memphis. In 10 months it did more than a million dollars in sales. And the chain just kept on growing. By 2007, Dollar General had just over 8,000 stores in 35 states. Most were in rural areas where rents were cheap and it was hard for people to get to department stores. The chain no longer sold everything for a dollar, but saw itself as a small box discounter. Walmart and Target, they're big box discounters. They build huge stores, big boxes and sell a huge range of items and groceries. But Dollar General builds small boxes. These small stores allow Dollar General to open new stores quicker and locate them closer to where people live. And since the stores were smaller, so too was the choice on the shelves. Dollar General didn't sell low profit, perishable food items like fresh fruit and vegetables. It sold frozen, canned or dry food. And it was a winning formula. But after years of growth, Dollar General began sputtering off the back of a booming economy, shoppers preferred one stop stores like Walmart. Dollar General's lax inventory management meant food favorite items were often out of stock. Seasonal items that didn't sell got put back on the shelves the following year instead of being cleared out to make space for new products that might prove more popular. Rising fuel costs, rapid over expansion and the neglect of older stores also dragged down profits. All of which led to dollar general shuttering 400 stores in 2007. And that's when KKR moved in, convinced that with the right CEO in place, it could resuscitate the chain. A few months after the tour of the Phoenix stores, Rick Dryling goes to lunch with KKR co founder George Roberts in California. None of these meetings are ever billed as job interviews, but Driling knows the score and his resistance to taking the job is eroding. Seeing Those stores up close has convinced him that Dollar General is exactly the kind of challenge he wants. But KKR's Roberts wants to be sure Driling's resume fits. He's worked at the supermarket chain Safeway, and he's doing great work at the New York drugstore chain Duane Reade. But Roberts is less sure that he's a fit for a business whose poor customers are people on low incomes in rural areas. So Roberts asks him a question. He asks every person he thinks of hiring. Rick, on a scale of 1 to 10, how well suited do you think you are to this job? Dryling doesn't miss a beat. On a scale of 1 to 10, I'm 12. Roberts has never had anyone rate themselves off the charts before. He can't decide if it's arrogance or rock solid confidence. In the end, he takes the risk. KKR hires Driling on a salary of $1 million a year, a modest salary for someone to run a company this big. But the stock options sweeten the deal, promising Driling big returns. If he can live up to his 12 out of 10 boast. Driling does not waste time. Dollar General is a retailer built on tiny margins, and to thrive, it has to wring out maximum profit and efficiency from every square foot of its stores. Over the next year, store managers lose autonomy over how shelves are stacked and where products are displayed. Driling opens three prototype stores to test new layouts and ideas. Sales figures are monitored closely. When the numbers show candles sell slowly, well, he halves their shelf space. He reduces the number of battery suppliers from four to two and pits them against each other in a price war to stay in stores. Dryling also improves the supply of consumables, products that households consume quickly, like eggs, milk, toilet paper. These are the items that get customers visiting stores regularly. Once in the store, shoppers then remember they also need to buy other higher profit items like birthday cards or school supplies. One sip of Dollar General's store brand, Cola, was all Dryling needed to decide he had to overhaul the company's private label products. But Cola was so bad he instantly spat it out. He can't understand why clothing doesn't sell well, so he commissions extensive market research. The study reveals the stores need to stock more men's and children's clothing. The core customers might be women, but the research found that they buy clothes for their kids first, their husbands next, and themselves last. This rush of change coincides with the 2008 financial crash. The resulting recession drives more people into the arms of dollar stores. And as Dollar General grows, so too does its buying power, which helps it obtain better deals with suppliers. By 2009, Dollar General is doing so great that KKR decides to cash out earlier than planned. In November 2009, dryling rings the bell on the New York Stock Exchange. The moment signals the return of Dollar General to the stock market. Two years earlier, KKR paid $22 a share to buy the company. When KKR sells its last Dollar General share in 2013, the price will have risen to $60. Dollar General is now a star performer that's making billions for KKR. And that's giving KKR's Wall street rivals severe FOMO. You know, fear of missing out. One of those rivals is Trian Partners. Remember them from menacing Disney a few seasons back. The folks who bought a load of Disney stock and tried to force out CEO Bob Iger. Well, that's all still in the future for Tryan. Right now, it's September 2011. Tryan has seen what's happened at Dollar General and how much money KKR made, and it wants a slice of that action. Tryin takes aim at Family Dollar, the number two player in the dollar store market. Family Dollars always had fewer stores than Dollar General, but in 2006, it had higher sales per square foot. But after Dollar General's dramatic turnaround, Family Dollar slipped behind. Family Dollar got its start when an ambitious young man named Leon Levine walked into a Dollar General store back in 1959. He was only in his 20s, but had already helped run a department store and co owned a factory. While studying business in his spare time, Levine immediately saw the potential of the concept and left, determined to get into the dollar store business. So he borrows money and opens the first Family Dollar store in his hometown of Charlotte, North Carolina. As he expands, Levine scouts his locations for new stores by looking for oil stains in nearby parking lots. His theory? If people don't have enough money to maintain their cars, they'll shop wherever products are cheapest. What set Family Dollar apart from Dollar General was where it chose to open stores. Dollar General focused on rural locations where real estate was cheap and competition low. Family Dollar focused on low income urban areas. And this strategy worked well for decades. But in the late 2000s, Family Dollar's City focus became a problem. Skyrocketing rents, shabby stores, poor product mix and increased competition from big box retailers squeezed its profits. The recession of 2008 and 2009 hid the problems as profits boomed across all dollar stores. But the problems never really went away. And by 2010, Family Dollar had had to slow down new store openings. Its sales per square foot now lagged 35% behind those of Dollar General. But Tryon thinks these problems can be fixed, just like they were at Dollar General. So it buys 8% of family dollar and threatens to stage a hostile takeover if the company doesn't agree to its demands. One of those demands is appointing its choice of president and chief operating officer, Michael Bloom. Like Dryling, Bloom's also a former drugstore man. He used to work for cvs. Blum adopts a deep discounting strategy. Deep discounting. It works like this Stores raise their core prices but offer huge discounts on selected items each week. The big discounts get people through the door, while the higher core prices boost more profits. It's a strategy that's worked wonders for the drugstore chains. But Blum and Tryan are about to discover that what works in one type of retailer doesn't always work for another type. And that's going to push Family Dollar into a drastic move.

[Mathis]

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[Mimi Jacobs]

April 2013 Howard Levine, the CEO of Family Dollar, walks through Aretsky's Patroon, an upscale eatery in midtown Manhattan. He's in his 50s and his thin, bespectacled face wears a frown as he enters the private dining room at the Back Ed Garden from Try in stands up slowly to greet him. The room is tiny, but it's ideal for confidential financial discussions like the one that's about to take place after they order food. Garden cuts to the chase. Howard our view at Try in is the attempt to revive Family Dollars failed. You're losing customers to Dollar General every day. Levine shifts uncomfortably. He took over from his father, Leon, 16 years ago. Seeing the family business hit choppy waters on his watch weighs heavily. Well, part of that is the strategy of deep discounting. Price promotions don't work with our customers. They need to know how much they'll be spending each week. Garden shrugs. I agree that your approach hasn't been as successful as we'd hoped. But you're the CEO, Howard. Your store's sales aren't good enough. You're making what, on average, $180 per square foot a year? Well, Dollar General makes 223. I agree we've lost our way. But these things, they take time to turn around. It'll happen quicker if we sell Family Dollar to Dollar General. They know what works for Levine. The idea of selling the family business is a tough pill to swallow emotionally. But he knows Wall street investors think he's a mediocre CEO, and he's only in place because dad gave him the job. Perhaps the best thing for the company would be a sale. Six months later, in October 2013, Levine finds himself in an elegant meeting room at the historic Hermitage Hotel in Nashville. Sitting opposite him is Rick Driling, the superstar CEO of Dollar General. They're here to discuss a merger of their companies, and Driling seems interested. He tells Levine that he's sure that the changes he made at Dollar General would work at Family Dollar. Buying Family Dollar would also help Dollar General break into more urban markets. But Levine's here not just to sell Family Dollar he's here to ensure it sells for a good price. So he's been briefed for this negotiation by the team at Tryon, and his instructions are to use his own position as CEO as a bargaining chip. Levine points out that he's younger than Dryling, so it would make sense for him to be the CEO after the takeover. Driling finds that idea ridiculous. He tells Levine that that's a deal breaker. Dollar General is the one buying Family Dollar. Remembering his coaching, Levine shifts his position quickly. He tells Driling that he might be prepared to step aside if Dollar General pays a premium for Family Dollar. Dryling narrows his eyes but agrees to consider it. Just as Levine and Tryon hoped, Levine leaves Nashville with a spring in his step, he feels like a deal is in the offing. Levine spends the next few weeks waiting for a Dollar General call that never comes. He arranges further meetings. They get canceled. He leaves messages. They go unanswered. Levine knows when he's being ghosted. He wonders if Dollar General is stringing them along in the hope Family Dollar stock price will drop even lower and then they can buy it at rock bottom prices. With Dollar General ghosting them, Levine and Tryon go back to the drawing board. They hash out a new strategy to revive the company. Former CVS man Michael Bloom leaves the deep discounting. Price promotions are ditched and 375 worst performing stores get shut. Bloom's downfall is a mini lesson in know your customers. He came from a place where price promotions worked and he had genuine insight about his customers at cvs. But this meant he assumed he also knew Family Dollar customers. What he didn't factor in is what the shop stood for in the minds of its customers and their expectation of consistently low pricing for customers on very tight budgets. Well, it's a headache. If an essential like toothpaste is very cheap one week, but pricey the next, understanding what really drives customer decisions, that's crucial. Family Dollar hires Morgan Stanley to assess if there are any other buyers out there. But it seems like a long shot. Dollar General and Family Dollar are far bigger than their rivals. Dollar General is really the only player in the market that could afford to buy Family Dollar. But then in March 2014, Levine gets an unexpected phone call. It's from a new suitor, Bob Sasser, the CEO of Dollar Tree. Now Dollar Tree is the distant number three in the dollar store race. It has around 5,000 stores. Family Dollar has over 8,000. But its business model is very different. Compared with its bigger rivals. Shopping at Dollar Tree is a bit more like a treasure hunt. Instead of selling cheap everyday essentials, it sells cheap treats. Things like toys, bath bombs, birthday balloons, seasonal items like Valentine's gifts and Mother's Day decorations. And unlike Dollar General and Family Dollar, it still prices everything it sells at a dollar. Of the three, it's the only true dollar store. And where Dollar General's rural and Family Dollar's urban, Dollar Tree's suburban. Most Dollar Trees are in suburban neighborhoods and shopping malls and seem to draw in a wider, more affluent customer base. But Dollar Tree is worried about the future. Walmart and Target are opening smaller neighborhood stores in suburban areas and trying to lure away their customers. So when Dollar Tree hears Family Dollar is up for sale, it senses a chance to fight back. Together. Dollar Tree and Family Dollar would have more than 13,000 stores. That's enough to springboard over Dollar General to become the market leader. It would also increase its buying power, helping it squeeze better deals out of suppliers. And it's not just Dollar Tree that's excited about this deal either. For Levine, there's another advantage to selling Family Dollar to Dollar Tree. His lawyers have warned him even if Dollar General bought Family Dollar, the deal would likely be blocked on antitrust grounds. Family Dollar and Dollar General have the same business models. They often sell the same products and are sometimes located near each other. But Dollar Tree is a different model of business with a smaller overlap. So a merger wouldn't risk being deemed anti competitive. Levine is excited. He can't help but feel that Dollar Tree is his knight in shining armor. The companies sign a non disclosure agreement to keep their talks secret until they're ready to announce a deal. The merger plans take shape quickly in June 2014. After a two month whirlwind romance, they are within weeks of announcing their UN June 2014. It's late on a Friday night and Levine is at Family Dollar's head office in Charlotte, North Carolina. He reads through some of the sale documents, carefully tapping out his comments for the lawyers. Finally, he finishes up with a satisfied smile. The secretive negotiations with Dollar Tree are going so well, he won't have to work this weekend. He's looking forward to spending it with his family, maybe even sneaking in around a golf. His phone rings. He doesn't recognize the number. Perhaps it's a Dollar Tree lawyer with a question. This is Howard Levine. Mr. Levine, it's Carl Icahn. Levine's heart sinks with just five words. His dreams of a relaxed weekend are over. Icon is a corporate raider. Wall Street's version of the dementors from Harry Potter. Icahn's the guy who bought the iconic airline TWA and gutted it. He became a half billion dollars richer by turning TWA into a shell drowning in half a billion dollars of debt. You might also remember him from our Blockbuster vs. Netflix season. He's the investor who killed off Blockbuster's DVD rental service just as it was about to destroy Netflix. Rumor is he was also the inspiration for Michael Douglas. Greed is good character Gordon gekko in the 80s film Wall Street. Remember? So yeah, if you're Howard Levine and you get a surprise call from Carl Icahn just after the stock markets close for the weekend, your heart would sink too. And what can I do for you, Mr. Icon? Well, I just bought 9.4% of your company, Mr. Levine. That makes me one of your biggest shareholders. Why don't you come to Manhattan for dinner with me? Levine resists the urge to swear. This is not an invitation he can refuse. An Icon's entering the fray just as he's about to seal the deal with Dollar Tree. At such a delicate stage, this is the worst news he can possibly imagine. If Icon launches a hostile takeover now, it will blow up his plan to sell to Dollar Tree. And if that happens, Levine will also lose control of the fate of his family's business.

[Aaron]

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[Narrator]

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[Dylan]

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[Narrator]

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[Narrator]

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[Mimi Jacobs]

June 18, 201412 days later, Howard Levine rides the elevator to a penthouse apartment on the 51st floor of a skyscraper in midtown Manhattan. With every floor he glides past, his stomach drops. This past week has been tough. Icon buying into Family Dollar immediately ignited talk across Wall street of the chain being up for sale. The company's stock has soared, making it more expensive for Dollar Tree to buy. Maybe even too expensive. The deal he's spent so many hours working on is hanging by a thread. Levine steps into the luxurious penthouse to be met by a butler. Good evening, Mr. Levine. Please follow me to the balcony. Sure. Thanks. Despite being a rich man, Levine was raised to be frugal. The wealth on display in this penthouse shocks him. He steps out onto the balcony and sees the impressive city views framing icon. The bearded 78 year old corporate raider is mixing martinis. I'm making drinks. What will you have? I'd love one, but I'll say no. I need to keep my wits about me tonight. Not drinking isn't going to help you. Icon grew up poor in Queensland, and he's known for his bruising approach to negotiations over dinner. Icahn tells Levine he needs to sell Family Dollar to Dollar General. It's bigger and better run in vain. Levine argues that selling to Dollar General is futile because of the antitrust issues. He tells Icahn he hasn't given up hope of reviving his family company. I truly believe that we can turn our fortunes around. A big part of the problem was the misjudged pricing strategy that Michael Bloom brought in. Icon cuts him off. Tell it to your mother. You're not in charge anymore, Howard. You've let your company become a target. And I'm going to do everything in my power to get a good return on my investment. I'll launch a hostile takeover if I have to. Levine feels helpless and frustrated. Family Dollar share price jumped after Icon bought his shares. Icahn's already made a huge profit on paper. A profit that will get cashed in if Dollar Tree still goes ahead with a buyout. But Icon doesn't know this. The Dollar Tree talks are still secret. And the non disclosure agreement Levine signed with Dollar Tree means he can't tell Icahn about it. Carl, would you be willing to sign an NDA so we can discuss things more openly? We'd also need you to sign a clause prohibiting you from buying more shares in Family Dollar. Icon narrows his eyes. No, I would not. And if you don't tell me which directors are going to work on the sale to Dollar General, I'll move to fire the entire board. Lavine leaves the penthouse feeling shaken. Icon's hurricane tactics could destroy the sale to Dollar Tree. And there's nothing he can do to stop it. Over the next few weeks, a titanic Wall street tussle over Family Dollar ensues. Icahn brokers another meeting between Levine and Rick Driling of Dollar General. But Levine, still hampered by his non disclosure agreement, can't reveal the rival Dollar Tree bid to he either of them. As a result, Driling says Family Dollar stock price is now too high for Dollar General to consider an offer. Soon after, Driling makes a shocking announcement that he'll retire next year. Driling's announcement takes even Icahn aback. He knows any new CEO would not contemplate a complex buyout and merger in their first few weeks of work. The chances of Dollar General buying Family Dollar now seem less than zero. And that gives Levine just enough breathing space to finalize the sale to Dollar tree. And in July 2014, the merger deal goes public.

[David Brown]

As the Wall Street Journal tells us about a deal this morning involving dollar stores and a lot of dollars discount chain, Dollar Tree is buying Family Dollar stores for about eight and a half billion dollars. The combined company will have more than 13,000 stores in the US and Canada. That's nearly three times as many as Walmart.

[Mimi Jacobs]

Now here's where it gets messy. There are just too many stores with the word dollar in it, right? And they're all going to war. So let's recap here. Dollar General, it's the biggest and oldest, so let's call it the Big brother. It's the one. Mr. 12 out of 10 CEO Rick Dryling runs right. Family Dollar is the second biggest and it's the one that's in trouble. Think of it as the wayward middle brother and the one Levine is in charge of. That leaves Dollar Tree, the baby brother. It's the third place Dollar Store and looks nothing like the other two. So the baby brother, Dollar Tree, wants to buy Family Dollar, the middle brother. And that news has just made their big brother, Dollar General mad. Very mad. You see, Dollar General's board had already decided it should buy Family Dollar, but it made the mistake of thinking it could do that at its leisure. After all, there was no one else with the incentive to bid for it. Or so they thought. Now Family Dollar is in danger of being stolen from under their noses by Dollar Tree, the baby brother they dismissed, and two brothers ganging up against their big brother, well, that suddenly makes them a serious competitive threat to Dollar General. So Dollar General goes to war. Rick Dryling cancels his retirement and makes a public offer to buy family dollar for $8.9 billion, more than dollar Tree is offering. But Family Dollar isn't interested. Its leadership's convinced that a sale to Dollar General will fall foul of antitrust regulations because the two companies are too similar. So Family Dollar sticks with Dollar Tree's offer. And that angers Driling even more. He publicly accuses Levine of engineering the sale to Dollar Tree to save his own job as CEO. Driling also dismisses the antitrust concerns as a smokescreen.

[David Brown]

The battle among dollar retailers just became a little more expensive and threatens to get nasty. Dollar General is raising its already higher offer for family dollar to $9.1 billion from 8.95 billion and says it may bypass the board and go directly to shareholders with a hostile takeover if the sweetened deal is panned.

[Mimi Jacobs]

But just before shareholders can vote on Dollar General's latest offer, the FTC steps in. The FTC gets to weigh in on mergers and acquisitions for the United States government. It's the Federal Trade Commission. It fears that if Dollar General buys Family Dollar, the combined company will dominate the market so much it'll reduce competition. So it rules that Dollar General can only buy Family Dollar if it sells 4,000 stores. And that is is a deal breaker. Dollar General reluctantly concedes defeat. And Dollar Tree, the baby brother of the three, gets family dollar for $8.5 billion in cash and stock. It's a massive payday for those who engineered the sale. As one of the biggest shareholders in Family Dollar, levine pockets around $700 million. Try and partners, who bounced the company into putting itself up for sale, makes a profit of $400 million. Icahn sold his shares before the deal went through, but still walked away $200 million richer. The deal also transforms the dollar store scene. It's now a two way battle at the top, Dollar General with almost 12,000 stores versus the combined might of Dollar Tree and Family Dollar with more than 13,000. And to try and stay ahead of one another, the two rivals start opening more and more stores across the country. Sometimes several a day. Suddenly, dollar stores seem to be sprouting up everywhere. And as the number of dollar stores across the country rises, many start to question the impact they're having on communities. In fact, there's like five or six of them at this point. In this small area is a little much. In many places, the influx of dollar stores means local grocery stores can't compete. Many go out of business, at least on A weekly basis, we get emails or calls from some small town saying Dollar General has been in town and our business has suffered. Dollar General didn't even have to put an announcement in the paper that they were opening a store here. And from that point on, I mean, we just started seeing a drop in sales and we basically have lost 100 customers a day for three years. And soon it's not just local businesses that have a problem. The dollar store chains don't sell fresh food, so people have to drive miles if they want to buy that. And many disapprove of dollar stores selling junk food, alcohol and cigarettes in low income communities which already suffer the poorest health outcomes in the country. They have a model that is a brilliant model to make quick bucks off the backs of our health. But the expansion of dollar stores just keeps accelerating as the two rivals try to outgrow each other. By the end of 2017, Dollar General, Family Dollar and Dollar Tree have nearly 30,000 stores nationwide. That's more than all the Starbucks and McDonald's in America combined. And Americans are now wondering whether the dollar stores are saving hard hit poor and remote communities or simply sucking them dry. On the next episode, communities and government officials fight back against the proliferation of dollar stores. Digital newcomers crush prices even lower. And a spike in inflation. Inflation threatens to upend the dollar store model from wondering. This is episode one of Price wars, the fall of dollar stores for business wars. If you're interested in hearing more about the fierce battles of America's discount retailers, we recommend the Business wars season Target versus Walmart. A quick note about the recreations you've been hitting hearing. In most cases, we can't know exactly what was said. Those scenes are dramatizations, but they're based on historical research. I'm your host David Brown. Judy Cooper of Yellow Ant wrote this story. Research by David Wolinski. Sound design by Ryan Potesta. Fact checking by Gabrielle Jolais. Voice acting by Chloe Elmore. Our managing producer is Desi Blaylock. Our senior managing producer is Callum Plews. Our producer is Tristan Donovan of Yellow Anthony. Our senior producers are Emily Frost and Dave Schilling. Karen Lowe is our producer emeritus. Our executive producers are Jenny Lauer Beckman and Marshall Louie. For wondering.

[Jesse Weber]

In the early hours of December 4, 2024, CEO Brian Thompson stepped out onto the streets of midtown Manhattan.

[Mimi Jacobs]

This assailant pulls out a weapon and starts firing at him.

[Jesse Weber]

We're talking about the CEO of the biggest private health insurance corporation in the world and the suspect he has been.

[Mimi Jacobs]

Identified as Luigi, Nicholas Mangione became one.

[Jesse Weber]

Of the most divisive figures in modern criminal history.

[Mimi Jacobs]

I was targeted, premeditated, and meant to sow terror.

[Jesse Weber]

I'm Jesse Weber, host of Luigi, produced by Law and Crime and Twist. This is more than a true crime investigation. We explore a uniquely American moment that could change the country forever.

[Dylan]

He's awoken the people to a true issue. Finally, maybe this would lead rich and powerful people to acknowledge the barbaric nature of our healthcare system.

[Jesse Weber]

Listen to Law and Crime's Luigi exclusively on Wondery. You can join Wondery in the Wondery app, Spotify or Apple podcasts.