EXCLUSIVE-Buyout firms vie for discount retailer Family Dollar, sources say

Adds share move in paragraph 4

By Abigail Summerville

NEW YORK, Feb 20 (Reuters) - Private equity firms Apollo Global Management and Sycamore Partners are among the bidders who are competing to acquire Family Dollar, a discount retail chain operated by Dollar Tree DLTR.O, according to people familiar with the matter.

Investment firm Brigade Capital Management has also expressed interest in buying Family Dollar, the sources said, requesting anonymity as the discussions are confidential.

A deal for Family Dollar, which could value the retailer at several billion dollars, is not imminent, the sources said, cautioning that Dollar Tree could choose not to sell the business. It is also possible that a different suitor for Family Dollar could emerge, the sources added.

Shares of Dollar Tree, which has a market value of about $16.5 billion, jumped more than 5% on the news on Thursday, before paring some gains.

Dollar Tree did not respond to a request for comment. Apollo, Brigade and Sycamore declined to comment.

Chesapeake, Virginia-based Dollar Tree has been working with investment bankers at JPMorgan Chase to explore options, including a potential sale or spinoff, for Family Dollar since June last year. The move marked a reversal for Dollar Tree, which acquired Family Dollar in 2015 for about $9 billion after outbidding its biggest rival Dollar General DG.N.

Since the takeover, Family Dollar has struggled with its performance and its growth has stalled as the discount retailer has been unable to attract new customers. Its performance has lagged larger retailers such as Walmart WMT.N and Target TGT.N, as consumers cut back on discretionary spending due to high inflation.

As of November 2, Dollar Tree operated 16,590 stores across 48 states and five provinces in Canada under the brands of Dollar Tree, Family Dollar and Dollar Tree Canada. Family Dollar generated roughly $13.7 billion of net revenue in the last 12 months, according to Reuters calculations.

Sycamore, which has raised about $10 billion in aggregate committed capital, is an experienced retail investor that owns retailers like Staples, Loft, Ann Taylor, Talbots and Belk. In recent months, Sycamore has also been attempting to pull off a takeover of pharmacy chain Walgreens Boots Alliance WBA.O.

Apollo Global Management, which had about $70 billion of assets under management under its private equity strategy as of December 31, has acquired and invested in retailers including Michaels and PetSmart.

Brigade Capital manages around $27 billion of assets and is primarily known as a credit investor. Last year, Brigade partnered with investment firm Arkhouse Management in its failed attempt to acquire department store Macy's M.N.