We have already noted on numerous occasions how the floodgates for re-sales or re-IPO’s of old private equity acquisitions have to come back on the market.  And now we have the first of many large private equity deals coming.  Dollar General Corporation has filed to come public via an initial public offering for up to $750 million worth of common stock.

Dollar General was acquired by private equity firm Kohlberg Kravis Roberts & Co., or KKR,  in 2007.  You can guess what it does if you didn’t know it already… it is a dollar store.  The deal was valued at $7.3 billion at the time and shares ran up more than 25% on the announcement when it was public.  This used to trade under the NYSE ticker “DG” before it went private.  There is an easy list of competitors:

• Family Dollar Stores Inc. (NYSE: FDO) with a $4.11 billion market cap;
• Dollar Tree Inc. (NASDAQ: DLTR) with a $4.02 billion market cap;
• 99 Cents Only Stores (NYSE: NDN) with a $890 million market cap.

What is interesting is that there was no stock ticker assigned in the filing, nor was any designated exchange listed as whether it would by the NYSE or NASDAQ. There were also no financial terms disclosed in the deal for any formal pricing.

The underwriting group is huge.  Joint book-running managers are listed as Citigroup, Goldman Sachs, KKR, BofA Merrill Lynch, and J.P. Morgan.  The co-managers in the deal are listed as Barclays Capital, Wells Fargo, Deutsche Bank, and HSBC.

As far as the use of proceeds…..

The company will redeem an undetermined amount of senior subordinated notes at a redemption price of 111.875% and the remaining amount of senior notes at a redemption price of 110.625%.  Dollar General will pay accrued and unpaid interest on the notes through the redemption date with cash generated from operations.

As of the last filing date there was approximately $1.175 billion principal amount of senior notes outstanding at a rate of 10.625% due on July 15, 2015 and $655.9 million at a rate of 11.875% due on July 15, 2017.

The successor company that was combined as a successor company had annual sales of $10.4577 billion in the period ending January 30, 2009.  Its gross profit after the cost of goods was $3.0611 billion and its after-tax net income was $108.2 million.

If this is successful, there are many more private equity-backed IPO’s which we could see.  Not just a lot… a flood.

JON C. OGG
AUGUST 20, 2009

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