Dollar General goes retail on Wall Street

Well, Dollar General has once again become a public company via an IPO. The company issued 34.1 million shares at $21 each. The price range was at $21 to $23.

Part of the proceeds of the offering will pay down debt. Oh, and $59 million plus 1% of the IPO proceeds will go to KKR, Citi and Goldman Sachs. Keep in mind that Dollar General already paid a $239 million dividend to the private equity sponsors back in September.

The recession has been good to Dollar General, as consumers seek bargains. For the 26 weeks ended July 31, 2009, total sales increased 13.3% to $5.68 billion and same-store sales were up 10.8%.

Dollar General has also been effective in continuing to cut costs. In the first two quarters of this year, there was $243.9 million in cash flow from operations.

Another key to the success of Dollar General is the capable management. For example, the company hired Richard Dreiling as CEO (in January 2008), who has 39 years of retail experience.

Despite all this, the IPO is a bit muted in its debut, with the stock up $1 to $22. Then again, the valuation is frothy at 28 times earnings and the debt load is still significant ($4.1 billion at the end of July).

Tom Taulli is the author of various books, including The Complete M&A Handbook.