$7.3B Deal Snaps Up Dollar General

GOODLETTSVILLE, TN-Private-equity firm Kohlberg Kravis Roberts & Co is acquiring discounter Dollar General, in a deal valued at $7.3 billion, or $22 per share. Executives expect the acquisition of the 8,260-store chain to close in the third quarter.

Dollar General’s stock closed at $16.78 on Friday. The deal includes the assumption of about $380 million in debt for New York City-based KKR.

The acquisition is a continuation of the trend of private-equity firms buying up large retailers and restaurant operators and taking them private. Among the chains that were bought last year were Outback Steakhouse, Yankee Candle Co. and Petco.

Kohlberg is not new to the retail industry. The firm is one of the entities that acquired the Toys “R” Us chain in March 2005 for $8.6 billion. It has also had previous investments in discount department-store chain Fred Meyer and Regal Cinemas.

A Wachovia report says that Dollar General shareholders are receiving a premium for the company. “It should be noted that current operating fundamentals at DG can best be described as ‘struggling’ and in transition to new strategies in an attempt to turnaround the business, in our opinion,” says the report, released by the firm’s retail analysts.

In its most recently-reported quarter, which ended Nov. 3, the locally-based retailer’s same-store sales rose 2% year over year on total sales of just more than $2.2 billion. Executives announced in November that they were slowing the chain’s growth, from 600 new stores in 2006 to 300 this year and 400 in 2008.