June 6, 2017 / 9:48 PM / 2 months ago

Dollar Tree sues Dollar Express, alleges funds siphoned

2 Min Read

An exterior view of a Dollar Tree store is seen in Pasadena, California August 31, 2015.Mario Anzuoni

WASHINGTON (Reuters) - U.S. discount retailer Dollar Tree Inc (DLTR.O) has filed a lawsuit against Dollar Express which was unsealed on Tuesday, alleging that the smaller company's private equity owners siphoned off funds and failed to pay for $50 million in goods and services.

Dollar Express was formed in 2015 when Sycamore Partners II LP bought some 330 stores in 35 states from Family Dollar and Dollar Tree. The two companies were required to sell the stores in order to win antitrust approval for a merger.

In a complaint filed in Delaware's Chancery Court, Dollar Tree accused Sycamore of siphoning tens of millions of dollars from Dollar Express, failing to pay for at least $50 million in goods and services provided to Dollar Express during a transition period and failing to rebrand Family Dollar stores as Dollar Express.

Dollar Express has filed a lawsuit against Dollar Tree, saying that the larger chain drove Dollar Express out of business by opening new shops near the new chain and putting underqualified and inattentive store managers in divested stores, among other actions.

With Dollar Express' failure, the stores are being purchased by Dollar General Corp, with the transfer expected this month.

Dollar Express and Sycamore Partners said in a statement that they believe the allegations in the Dollar Tree lawsuit were "without merit."

(This version of the story corrects headline and paragraphs 1 and 4 to show lawsuit was filed June 1 and unsealed on Tuesday)

Reporting by Diane Bartz; Editing by Dan Grebler

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