Kohlberg Kravis Roberts & Co. (KKR), registered yesterday to take discount retailer Dollar General Corp. to Wall Street. The company plans to sell up to $750 million in stock through an initial public offering. If they get close to that figure, it’ll be the biggest IPO so far in 2009.
The Goodlettsville, Tenn., chain, a favorite of bargain hunters, has done well in this economy. The Wall Street Journal reports:
Discounters like Dollar General have done well in the recession as customers trade down to cheaper merchandise. The question for retailers is whether shoppers will remain frugal or slowly resume their old spending habits whenever they get more money in their pockets.
“We didn’t anticipate a recession as deep as the one we’re all experiencing,” said Michael Calbert, a KKR partner overseeing the investment, in a March interview with The Wall Street Journal. “But we did think Dollar General would be a good investment in difficult economic times.”
The market seems ready to buy:
Private-equity firms are taking advantage of a rally in equities to sell shares. In some cases, they are hoping to sell stock to raise equity and deleverage their balance sheets. In other cases the firms are exiting investments to return capital to their cash-strapped investor base.
Earlier this month KKR and a partner raised $650 million from an initial public offering of Avago Technologies Ltd., the first large offering of a buyout-owned company this year. Last week General Atlantic LLC and Hellman & Friedman LLC sold IPO shares in health-care company Emdeon Inc.
Time will tell if consumers have altered their spending habits for good. If so, stores like Dollar General could continue to grow profits, and provide healthy returns to stockholders.