GOODLETTSVILE, TN—Following Family Dollar Stores' turndown of its previous bid of $78.50 per share, Dollar General Corp. on Tuesday came back with an all-cash offer of $80 per share, or about $9.8 billion including the assumption of debt, and threatened to go hostile if the board rejected the new bid. The Goodlettsville, TN-based retailer, already the largest in the dollar-store segment, has also more than doubled the number of stores that it would be willing to divest to satisfy antitrust concerns.

DG's previous bid for Family Dollar came three weeks after its smaller rival and Dollar Tree announced that the boards of both companies had approved a $9.2-billion cash-and-stock deal for Chesapeake, VA-based Dollar Tree to acquire Family Dollar. The combination would create a company with more than 13,000 stores across the US and Canada and annual sales exceeding $18 billion.

In its upsized bid for Matthews, NC-based Family Dollar, which cited antitrust concerns among its key reasons for rejecting the original offer last month, DG said it would be willing to divest as many as 1,500 stores, up from the previously announced 700, if ordered to do so by the Federal Trade Commission. Even so, a buyout of Family Dollar would give it a store count of nearly 20,000 locations across 46 states. DG also said it would pay a $500-million “reverse-breakup” fee to Dollar Tree should a union between DG and Family Dollar run afoul of antitrust regulators.

“Given the details of our revised proposal, we are certain that you will conclude that our revised proposal is a 'company superior proposal' and you will take the appropriate steps under your existing merger agreement with Dollar Tree to enable us to begin discussions so that we may enter into a definitive merger agreement,” Rick Dreiling, DG's chairman and CEO, wrote in a letter to Family Dollar's board. “However, in the event you refuse to engage with us regarding our revised proposal, we will consider taking our persuasive and superior proposal directly to your shareholders, as we are firmly committed in our belief that a combination of our companies is in their best interests.”

Family Dollar on Tuesday confirmed that it had received the unsolicited bid from DG and would review and consider the offer. Pending a review of the new DG proposal, Family Dollar's board has not changed its mind about recommending a merger with Dollar Tree, the company said in a statement.