Update: Monday morning’s bid by Dollar General to acquire competitor Family Dollar Stores may not be the last word. But where will another bidder come from?

Dollar General Corp. (NYSE: DG) said Monday morning that the company has proposed to acquire Family Dollar Stores Inc. (NYSE: FDO) for an all-cash price of $78.50 a share in a deal worth $9.7 billion. In late July, Dollar Tree Inc. (NASDAQ: DLTR) said it had entered a definitive merger agreement to acquire Family Dollar Stores for $74.50 per share.

The Dollar Tree offer included $59.50 per share in cash and $14.90 in stock for a total deal value of around $8.5 billion. Howard R. Levine, the son of Family Dollar’s founder and the company’s current chairman and CEO, and Nelson Peltz’s Trian Fund Management, together own about 16% of Family Dollar’s stock and have agreed to support the merger.

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The other big player here is Carl Icahn, who owns about 9.4% of Family Dollar Stores’ stock and had this to say about the Dollar Tree offer:

While we continue to believe there are a handful of potential buyers who could realize greater synergies through a combination with Family Dollar and are hopeful that one or more of them will surface as a result of today’s announcement, we are extremely pleased with Dollar Tree’s intention to acquire Family Dollar in a transaction that values the company at $74.50 per share. This is a big win for all shareholders of Family Dollar and yet another validation of the activist investment philosophy in general.

There is little chance that Icahn will now support Dollar Tree’s proposal.

Dollar General said it has committed financing for the $9.7 billion deal from Goldman Sachs and Citigroup Global Markets, including the $305 million termination fee that would be due to Dollar Tree if Family Dollar accepts another offer. Dollar General also said it is prepared to divest up to 700 retail stores in order to clear any antitrust hurdles. The company also said it is prepared to enter into a definitive merger agreement with Family Dollar that is essentially the same as the agreement the store now has with Dollar Tree altered to adjust for the higher price and the divestment of stores.

Shares of Dollar General were up about 10.5% in premarket trading Monday, at $63.45 in a 52-week range of $53.00 to $65.99.

Family Dollar Stores traded up nearly 6% to $80.51, above the 52-week range of $55.64 to $79.93.

Dollar Tree was unchanged, having closed on Friday at $55.60, in a 52-week range of $49.59 to $60.19.

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