* Dollar General IPO priced at $21, range had been $21-$23
* KKR sells 11.4 mln of the shares, to still own 89.5 pct
* rue21 shares price at $19, over $16-$18 range
By Phil Wahba and Clare Baldwin
NEW YORK, Nov 12 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. 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
The Dollar General IPO is the largest new offering by a
retailer recently as investors avoided shares in the
beleaguered sector during the recession.
But 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.
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
Private equity firm Blackstone Group (BX.N) also recently
said it is considering IPOs of up to 8 of its portfolio
Dollar General, which is based in Goodlettsville,
Tennessee, and operates about 8,577 stores in the United
States, is offering 22.7 million shares in the IPO.
Dollar General will use all of its share of the IPO
proceeds to pay down debt.
The IPO's underwriters, led by Citi, Goldman Sachs & Co and
KKR, have the option to buy another 5.1 million shares.
Dollar General reported quarterly sales of $2.9 billion for
the three months ended July 31, up 11.2 percent over the year
Dollar General shares are set to begin trade on Friday on
the New York Stock Exchange under the symbol "DG."
Separately, youth apparel retailer rue21 Inc RUE.O,
which operates 500 stores in the United States geared at
youths, priced shares in its IPO at $19 apiece, above the
expected range of $16 to $18.
The retailer sold 6.77 million shares, raising a total of
The Warrendale, Pennsylvania-based retailer itself is
selling 1.65 million shares in the offering, while stockholders
such BNP Paribas North America (BNPP.PA), are selling 6.77
million shares. rue21 will use its share of the proceeds to pay
down debt, according to a regulatory filing.
Funds advised by private equity firm Apax Partners, which
are the largest stockholders, are not selling any shares in the
IPO. Their stake in rue21 will fall to 57.9 percent from 62.2
The underwriters, which include Bank of America Merrill
Lynch, Goldman Sachs & Co and J.P.Morgan, have the option to
buy another 1 million shares.
rue21's same store sales, or sales at stores open for at
least a year, rose 4.1 percent in the six months ended Aug. 1,
2009, while overall sales rose 33.3 percent to $233.1 million,
with net income of $8.3 million.
Shares are set to begin trade on Friday on Nasdaq under the
ticker symbol "RUE."
(Reporting by Phil Wahba and Clare Baldwin, additional
reporting by Megan Davies; Editing by Phil Berlowitz, Bernard