Dollar General may go public again

Analyst says owner's timing 'pretty good' By Wendy Lee • THE TENNESSEAN • July 30, 2009 Wall Street analysts say there's a good chance Goodlettsville-based Dollar General Corp., a discount retailer that has made sales gains during the U.S. recession, may go public again two years after private equity buyers took it private in a multibillion-dollar deal. "It's pretty good timing," said Stacey Widlitz, an equity analyst with Pali Research in New York. "I think the trends are certainly with them." Dollar General was sold to Wall Street giant Kohlberg, Kravis, Roberts & Co. in summer 2007 in a $7.65 billion buyout. KKR was among four private equity firms interested in buying the discount retailer at the time as its shares dropped in price. Published reports, including a recent one in The Wall Street Journal, suggest that Dollar General's owners may be planning an initial public offering of stock as interest in IPOs nationally picks up steam. The newspaper said KKR would be one of the lead underwriters on a deal and sell shares to institutions and the general public. This would be the first time KKR would be the underwriter for its own IPO and the private equity firm plans to share the task with Goldman Sachs Group Inc. and Citigroup Inc., among others, the paper reported on Wednesday. Lately, Dollar General has done a better job than other retail chains owned by private equity firms such as the arts and crafts operator Michaels Stores Inc. and accessories retailer Claire's Stores Inc., said Ana Lai, a director at Standard & Poor's in New York. Lai said her firm had changed Dollar General's credit rating from a B- to a B+ earlier this year. The company "performed really well mainly because consumers (are) trading down and seeking more value," Lai said. Timing advantageous If KKR were indeed to be the lead underwriter in a deal, the private equity firm would be able to make more money, said John E. Fitzgibbon Jr., founder of IPO Scoop.com. Underwriting fees account for about 7 percent of the IPO price per share, he said. It's unclear at what level a Dollar General stock offering might be priced. Dollar General did not return calls seeking comment, and KKR did not comment. "We do not comment on market speculation," said Peter McKillop, KKR's director of communications. Some analysts said the move to make Dollar General a public company again makes sense because stock market conditions are better and more cost-conscious consumers are shopping at the store. Dollar General had 8,462 stores in 35 states as of May 1. Net income increased to $83 million in the first quarter, compared with $5.9 million a year earlier.