Dollar General has put in an offer of $9.7 billion for Family Dollar, beating out fellow competitor Dollar Tree's $8.5 billion last month. The deal was proposed Monday in a letter to Family Dollar's board.

Dollar General's offer to Family Dollar is attractive to Family Dollar shareholders because it is $4 per share higher than Dollar Tree's earlier offer. The $78.50 per share offer represents over a 3 percent premium in Friday's closing price of $76.06.

The chief executive officer for Dollar General explained why his company's offer is more beneficial than the offer from Dollar Tree.

"For Family Dollar shareholders, our proposal is financially superior to the current transaction agreement with Dollar Tree and would provide Family Dollar shareholders with a substantial premium and immediate liquidity for their shares," Rick Dreiling said Monday.

Family Dollar shares are up nearly five percent on the news of the proposed acquisition. Dollar General shares are up over 10 percent on the news.

Requirements to follow antitrust laws would force Dollar General to divest up to 700 stores if the acquisition with Family Dollar is completed.

"Dollar General has undertaken significant economic and antitrust analysis with respect to the transaction and is confident it can quickly and effectively address any potential antitrust issues," the company said in a statement. 

"For both Dollar General and Family Dollar customers, we would be able to provide better value and greater selection," Dreiling said.

Dollar General believes that if the deal is completed they would become the largest U.S. small-box discount retailer, the company said in a press release.

Dollar General urged the benefits of the merger. They said that the merger would lead to $550 million to $600 million in savings and profit "synergies" three years after the deal is completed.

Operating in 40 states with about 11,000 stores, Dollar General has an annual revenue of $17.5 billion, according to company filings. Adding Family Dollar, which has over 8,000 stores in 46 states, would lead to combined sales of almost $28 billion per year.

Dollar Tree has not yet upped their bid for Family Dollar, and it's unclear whether a bidding war will occur.