Private equity firm to buy Dollar General

/ Source: The Associated Press

Dollar General Corp. said Monday its board has agreed to a buyout offer of about $6.9 billion from the private-equity firm Kohlberg Kravis Roberts & Co. in a deal that will take the discount retailer private.

Dollar General shareholders must still approve the deal. The company’s board is recommending that its shareholders vote for it and the company said it could close in the third quarter.

The discount retailer, based in the Nashville suburb of Goodlettsville, operates about 8,260 stores.

Under terms of the deal, Kohlberg Kravis will pay $22 per share for each Dollar General share. The price represents a 31.1 percent premium to the stock’s closing price Friday on the New York Stock Exchange.

KKR will also assume $380 million in debt as part of the deal, Dollar General said.

“We are very pleased to announce a transaction that provides excellent value for our shareholders, representing a significant premium and the certainty of cash,” said David A. Perdue, chairman and CEO of Dollar General.

Last week, Dollar General reported its February sales at stores open at least a year rose 4.9 percent, beating Wall Street forecasts for a 4.6 percent jump. Total sales for the month rose 7.8 percent to $695.6 million from $645.4 million.

The company, which has about 64,500 workers, posted 2006 earnings of $350.2 million on sales of $8.58 billion.

Dollar General in November announced plans to close 400 stores and open about 300 new locations.

The plan, which also included changing inventory management methods, was slated to cost about $138 million, with $74 million related to store closings and $64 million for higher markdowns to aid the move away from its former inventory management model as well as other expenses.

Despite the hefty markdowns, the retailer said the change would improve the appearance of its stores and ultimately result in higher sales and lower employee turnover.