* Files for up to $750 million IPO
* Underwritten by Goldman, Citi, KKR itself, others
* Proceeds to pay down debt
* Dollar General to pay out $200 mln dividend
(Adds value of investment, quotes, details of other KKR
investments)
By Megan Davies and Phil Wahba
NEW YORK, Aug 20 (Reuters) - Discount retailer Dollar General
Corp, backed by powerful private equity firm Kohlberg Kravis
Roberts & Co [KKR.UL], filed for an initial public offering of up
to $750 million on Thursday, according to a regulatory filing.
It could be one of the largest IPOs of the year and among the
biggest exits through a public stock offering by a private equity
firm since the credit crunch sapped investor appetite for new
offerings.
The IPO market has been improving since the spring, as stock
markets have rallied. So far this year there have been 17 IPOs of
companies, raising $4 billion.
The lead bookrunners on the Dollar General offering will be
Citi (C.N), Goldman Sachs & Co (GS.N), Bank of America Merrill
Lynch (BAC.N), JPMorgan (JPM.N), as well as KKR itself.
Dollar General said it expected to pay a special dividend of
$200 million to existing investors prior to the offering. That
would include KKR, the pension and endowment funds that invested
in KKR's funds, and others that invested in Dollar General when
KKR struck the $7.3 billion deal to buy the firm in July 2007.
KKR's current investment in Dollar General is valued about $2
billion, or 1.7 times the cost of its original investment,
according to calculations by Reuters based on recent documents the
company has filed.
KKR bought Dollar General along with GS Capital Partners, Citi
Private Equity, and other co-investors.
Dollar General did not specify how much it expects the IPO to
yield but said it planned to use the proceeds to pay down debts
and notes.
"It's a strong cash generator that can perhaps justify such a
debt burden," said Matt Therian, a research analyst with
Connecticut-based investment firm Renaissance Capital.
"Even though things are looking better, being on the discount
end of the retailer spectrum will help."
By Renaissance Capital's initial estimates and comparisons to
industry peers, the company could be worth as much as $8 billion
to $10 billion.
An IPO of the retailer had been expected. A source familiar
with the situation previously told Reuters that advanced
preparations were in place to take the Tennessee-based company
public, which could happen in the late third quarter or fourth
quarter. Dollar General did not specify timing of the IPO in the
filing.
A successful IPO is particularly important for KKR, which is
itself looking to join rival Blackstone Group (BX.N) in becoming a
publicly traded company through a complex transaction that
involves combining with its Amsterdam-listed fund KKR Private
Equity Investors (KKR.AS) (KPE).
KKR PIPELINE
It follows the successful $745 million IPO of KKR-backed Avago
Technologies Ltd (AVGO.O), one of the largest and best performing
IPOs of the year whose shares closed 18.4 percent above their IPO
price on Thursday.
An IPO of another KKR-backed firm, hospital company HCA, is
also being considered, a source familiar with the situation
previously told Reuters.
Plans for HCA, however, are unlikely to get off the ground
until there is more clarity around the Obama administration's
reform of healthcare, that source said at the time.
In the prospectus, Dollar General said it had "substantial
debt" including a $2.3 billion senior secured term loan facility
which matures on July 6, 2014, $1.175 billion of senior notes and
$655.9 million of senior subordinated notes.
For the quarter ended May 1, 2009, Dollar General had net
sales of $2.8 billion, up 15.6 percent over the year earlier
profit, and made a profit of $83 million.
Dollar General said in its prospectus that it is the largest
discount retailer in the United States by number of stores, with
8,577 stores in 35 states as of July 31, 2009.
(Reporting by Megan Davies and Phil Wahba; Editing by Matthew
Lewis, Phil Berlowitz)
