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At the height of the private equity bubble – in July 2007 – KKR agreed to purchase Dollar General for $7.2 billion. To pull off the deal, KKR was able to borrow $4.7 billion.
Of course, the bubble has since burst and, as a result, there are few successes for the private equity folks.
But now KKR is sensing opportunity. According to a report from the Wall Street Journal [a paid publication], it looks like the firm is in the late stages of filing the necessary legal documents to take Dollar General public.
All in all, the deal should be well-received. Dollar General is the largest discount retailer in the U.S. with its impressive 8,462 store count. In the most recent quarterly report, the company posted a 15.7% increase in sales to $2.78 billion, with same-store sales up 13.3%. Operating profits doubled to $224.9 million. Expecting more growth, Dollar General has plans to add 450 new stores.
No doubt, KKR needs to show some success. The firm's portfolio has shrunk considerably and it is still difficult to pull off new deals because of the continued credit crunch. Besides, KKR still plans to take itself public.
Interestingly enough, in the Dollar General transaction, KKR will be a lead underwriter. This is unusual for private equity firms, but for KKR it's a way to transform its model to find new ways to generate new sources of income, which is certainly much-needed right now.
Tom Taulli is the author of various books, including The Complete M&A Handbook
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Reader Comments (Page 1 of 1)
7-30-2009 @ 1:22PM
JBS5022 said...
Dollar General should be able to post a margin of profit seeing how they will not pay anything worthwhile to their employees and anybody should post a margin of profit...whenever your getting your work force for practically free labor. They hire with an intent to barely allow their employee's anything but a few meager hours a week. No over time, no profit sharing, the only opportunity an employee has is to become a manager, or assistant manager..or what they call third key. These make about 7.00 to 9.50 and hour. Depending on what management scale you fit in. All other employee's are paid less than that, with a maximum work schedule of less than thirty hours per shift. Don't patronize Dollar General's efforts until you tell the whole story.
7-29-2009 @ 5:03PM
UltimoDragon said...
It should be noted that Dollar General was a publicly traded before KKR bought them.
My senior year of high school, our history teacher conducted a side project where we all researched and 'bought' 100 mythical shares in one stock. At the end of two months, the student who made the most money won $20. A friend of mine chose Dollar General (working there part time) and won the contest.
7-29-2009 @ 5:30PM
Denise said...
Glad to hear some good news for a change. I hope Dollar General takes over the whole world, wink...
7-29-2009 @ 5:34PM
al coholic said...
There are a lot of new Dollar General stores here in upstate South Carolina and they are doing very well. It's the only place where Wal-Mart prices seem high by comparison.
I also like Fred's.
7-29-2009 @ 7:37PM
Lisa said...
I use to be a Manager for Dollar General and they don't pay anything and work there staff like slaves. I will never shop there again
7-29-2009 @ 9:38PM
Dean said...
Dollar General does good because they use slave labor.
7-29-2009 @ 10:09PM
dxxy4u said...
Well, You can kiss Dollar General good bye. It will go the way of Wal-Mart. What a shame. Now I'll have only Dollar General and Dollar Tree to shop at.