Icahn, with big stake, tells Family Dollar it must sell itself, put 3 of his reps on its board

Activist investor Carl Icahn is urging discount retailer Family Dollar Stores Inc. to put itself up for sale immediately, saying its performance is weakening and it faces mounting competition.

Icahn is also calling for three of his representatives to be added to Family Dollar’s board. He made the case in a letter Thursday to Family Dollar’s CEO Howard Levine published in a regulatory filing.

Earlier this month, Icahn disclosed he held a 9.4 per cent stake in Family Dollar. In response, Family Dollar adopted a shareholder rights plan, or so-called “poison pill,” a defensive tactic that makes a hostile takeover prohibitively expensive.

Through the close of regular-session trading Thursday, the Matthews, North Carolina, company’s stock has gained 12.6 per cent since Icahn’s stake was first disclosed on June 6. It added another 2.6 per cent in after-market trading Thursday.

Shares in rival Dollar General Corp. also rallied after Icahn’s original disclosure, fueled by speculation it could be involved in a deal with Family Dollar.

“Consolidation in this space is inevitable and we believe that now is not the time for continued passivity,” Icahn told Levine in his letter, which did not name any potential suitors.

In a statement responding to Icahn’s letter, Family Dollar said it already is taking steps to improve its performance and provide shareholders with stronger returns.

The company noted that members of its board and management recently met with Icahn. “And as we expressed in the meeting, we are always open to constructively communicating with our shareholders with the shared goal of enhancing value,” it said.