Discount retailer Dollar General prices IPO shares at low end of range, trading begins Friday

Dollar General IPO set at $21 per share

PORTLAND, Ore. — Investors looking to have a hand in the future of frugal will watch shares of discount retailer Dollar General, which will begin trading Friday now that the company has priced its initial public offering.

Dollar General late Thursday priced its offering of 34.1 million shares at $21 each — the low end of its proposed range of $21 to $23 per share.

The company, based in Goodlettsville, Tenn., is one of the nation’s largest discount chains with more than 8,500 stores in 35 states. The company sells everything from food to home decor — usually for less than $10 — at its no-frills stores.

During the recession, discounters like Dollar General have thrived as shoppers look to them for low-cost deals on a variety of items. The offering was highly anticipated, given the company’s recent turnaround, size and well-known name.

“As soon as Dollar General was filed, there was instant buzz,” said Scott Sweet, senior managing partner at IPO Boutique.

Dollar General was publicly traded from 1968 until 2007, when it was purchased for $6.9 billion by an investment group that included affiliates of private-equity firm Kohlberg Kravis Roberts & Co. and investment bank Goldman Sachs, among others.

The offering sets the value of the company at nearly $7.2 billion after it is complete.

After the company was acquired, new management cut unprofitable stores and vastly improved its performance. Sweet said Dollar General is in the best shape it has been in for years.

Dollar General’s sales grew 10 percent in 2008 and 13 percent in the first half of 2009, according to the filing. Revenue totaled $9.5 billion in 2008. The company has also been steadily expanding its store base and plans to continue to do so for the near future.

Dollar General’s profit also grew more than four-fold from the first half of 2008 to the first half of 2009.

The company’s IPO includes 22.7 million shares offered by Dollar General and 11.4 million shares sold by a sole shareholder. Dollar General will not receive proceeds from stock sold by the shareholder, Buck Holdings, a subsidiary of KKR.

After the transaction is complete, Buck Holdings will be the largest shareholder, owning as much as 90 percent of the outstanding shares. If underwriters sell more than 34.1 million shares, they have the option to buy up an additional 5.1 million shares from Buck Holdings.

The company plans to use its estimated $445.2 million in proceeds to pay down debt.

Dollar General’s offering is the latest in an uptick in IPOs after the market nearly dried up last year. There were only 43 companies completing IPOs in 2008, the slowest year for IPOs in more than 20 years.

Investors shied away from the potentially risky investments but confidence has grown and to date, 48 companies have raised $20.9 billion this year, IPOScoop founder John Fitzgibbon said.

Other notable deals include Hyatt Hotels, Dole Foods and teen retailer Rue21, which is also expected to price its shares Thursday night.

Dollar General will trade on the New York Stock Exchange under the “DG” ticker.

Citi, Goldman, Sachs & Co. and KKR, along with BofA Merrill Lynch and J.P. Morgan, are serving as joint book running managers for the offering, with Barclays Capital, Wells Fargo Securities, Deutsche Bank Securities and HSBC acting as co-managers.