MKM Partners Thinks Dollar General Could Offer $83 Per Share For Family Dollar

Dollar General (NYSE: DG) could make a further offer as high as $83 per share for Family Dollar (NYSE: FDO), an analyst said Tuesday.

MKM's Patrick McKeever said Dollar General can afford to pay "in the mid $80s" for Family Dollar and still make a compelling strategic case for the deal.

Family Dollar traded Tuesday up 0.5 percent at $80.21 per share.

McKeever said competing suitor Dollar Tree (NASDAQ: DLTR) can only afford to offer $78 to $79 per share and that such an offer will be soon forthcoming.

Dollar Tree will then try to sell its lower bid on the supposedly lower risk of violating anti-trust rules, McKeever said in a note.

McKeever maintained a Buy rating and $75 target on Dollar General.

Dollar General's latest bid adds $1.50 per share to its August 18 bid of $78.50. Dollar Tree has offered $74.50 per share, which Family Dollar has accepted, citing anti-trust concerns.

But Dollar General said Tuesday it would wage a proxy battle for shareholder support if Family Dollar refused its latest offer.