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One green dollar

29 Jul 2009 By Lauren Silva

A Dollar General initial public offering could be a rare bright spot for Kohlberg Kravis Roberts. Those who buy shares in the US retailer, which prices most of its wares at $1, may end up pleased as well depending on how it s valued. In any case, Dollar has proven a great counter-cyclical investment for KKR. Henry Kravis could be in for a much-needed windfall.

Dollar is among a handful of retailers that have benefited from US consumers struggles. Rival Dollar Tree s stock price is up 24% over the past year and shares of 99 Cents Only stores have more than doubled. Of course, that only puts those stocks at about the level they traded at when KKR bought Dollar General in mid-2007. But the buyout shop has trimmed Dollar General s costs. Its ebitda has grown about 14% over the past year and has nearly doubled under KKR s ownership.

An IPO comes at a fortuitous time for KKR in another way. Pension funds and endowments are strapped for cash, in part because private equity firms are having a hard time selling portfolio companies. Dollar s debut could give the firm some money to hand back. And with KKR looking to bust into the underwriting game and take itself public acting as one of the lead managers on a strong deal would help burnish its credentials.

 

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