UPDATE 2-KKR's Dollar General prices IPO at low end

* Shares priced at $21 in IPO, range had been $21-$23

* KKR sells 11.4 mln of the shares, to still own 89.5 pct

* Dollar General sells 22.7 mln shares, will pay down debt

* Dollar General to debut on NYSE Friday under "DG" symbol (Adds analyst comment, background on PE deals, byline)

By Phil Wahba and Clare Baldwin

NEW YORK, Nov 12 (Reuters) - Discount retailer Dollar General Corp (DG.N) priced shares in its initial public offering at $21 each, at the low end of expectations, in the latest effort by a private equity firm to unload a portfolio company in a market that has become unreceptive to such deals.

Dollar General, which is almost entirely owned by private equity firm Kohlberg Kravis Roberts & Co [KKR.UL], had expected the shares to sell for between $21 and $23 each.

Dollar General and KKR sold a total of 34.1 million shares, yielding gross proceeds of $716.1 million in the IPO.

KKR, the only shareholder to offer stock in the IPO, is selling 11.4 million shares, after which it will still own 89.5 percent of the company, according to its most recent prospectus. KKR bought Dollar General for $7.3 billion in July 2007.

"Private equity firms sell their portion and generally give themselves a large dividend and a lot of people have frowned on that," said Scott Sweet, a senior managing partner with advisory firm IPO Boutique. "There's been too much greed."

Sweet, who credited KKR for bringing management that turned Dollar General around, said the IPO was priced in a manner to increase the odds the shares will rise in their debut on Friday and beat the lackluster performances of many buyout-backed IPOs since September.

The Dollar General IPO is the largest new offering by a retailer recently as investors avoided shares in the beleaguered sector during the recession.

Last month, Vitamin Shoppe Inc (VSI.N), a chain of health supplement stores, went public in a $162 million IPO and priced above expectations in a performance analysts had said would whet appetite for more retail stocks. Vitamin Shoppe has risen 18.5 percent since its debut.

In addition, discount chains have weathered the recession by drawing cash-strapped consumers away from other stores. Same store sales, or sales at stores open for at least a year, at Dollar General were up 8.6 percent over the same period, besting the vast majority of retailers.

The offering follows the successful August IPO by KKR-backed chipmaker Avago Technologies Ltd (AVGO.O) which raised $745 million.

KKR and rivals have sought to tap the IPO market to divest themselves of portfolio companies -- firms owned by private equity -- and will closely watch Dollar General's performance on Friday to further gauge the market's openness to buyout-backed IPOs.