Dollar General Discounts Shares In Secondary Offering After All-Time High (DG, GS, KKR, BRK-B)

Dollar General Corporation (NYSE: DG) was previously in the news for announcing a secondary offering of 25 million shares.   The offering has now priced at what seems a fair discount for the new share buyers.  The $45.25 share price compares to Tuesday’s close of $45.75.  The stock was trading at $47.26 the day before and its recent all-time high was $47.59.

All of the shares were sold by private equity backers who still own a large part of the company.  Selling shareholders include Goldman Sachs Group, Inc. (NYSE: GS) and affiliates of KKR & Co. L.P. (NYSE: KKR).  The underwriters have been granted an option to purchase up to 3.75 million additional shares.

Today’s secondary offering was by far not the first secondary offering where insiders sold, and all discounted share prices from the offerings have so far been nothing more than great buying opportunities.    Citigroup, Goldman Sachs, KKR, J.P. Morgan, and Barclays are listed as the joint book running managers; co-managers are listed as BofA Merrill Lynch, Wells Fargo, Sanford Bernstein, CICC, and Macquarie Capital.

In case you forgot, the new team managing funds at Berkshire Hathaway Inc. (NYSE: BRK-B) has bought Dollar General shares and is now up substantially.  It would be feasible that Team Buffett participated in the offering to buy more shares as the dollar store theme is one that still appears to be a secular trend rather than temporary.

We started covering Dollar General as a secular bullish buy back when shares were in the $20′s.  Shares are now around $45.30.  The consensus price target from Thomson Reuters is listed as $51.78 and the 52-week trading range is $29.84 to $47.59.

JON C. OGG