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Ackman Buys Family Dollar Stake, Says It’s an LBO Candidate

Bill Ackman, the founder of Pershing Square Capital Management known for investing in companies to press for changes, said he invested in Family Dollar Stores Inc. because it’s “very reasonably priced” and may be acquired.

Ackman, speaking today at the Ira Sohn Conference in New York, said it’s a “passive” stake, meaning he’s not going to pressure management.

“It’s a good business, it’s done very well for a long time,” he said. “It’s an attractive LBO transaction,” he added, using the abbreviation for leveraged buyouts.

Family Dollar, a discount retailer based in Matthews, North Carolina, has advanced 10 percent to $54.82 in 2011 after more than doubling during the prior three years. The stock climbed 2.5 percent to $56.19 at 5:15 p.m. New York time in after-hours trading following Ackman’s announcement.

It rejected a takeover offer from Nelson Peltz’s Trian Fund Management LP in March, saying it “substantially” undervalues its business, and adopted a defense to discourage unsolicited offers.

Family Dollar earns a “very attractive return on new stores,” Ackman said. If the company catches up with its rival Dollar General Corp. in terms of margins, “you make a lot of money,” he said.

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