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GOODLETTSVILLE, Tenn. -- National discount retailer Dollar General Corp. said yesterday its board has agreed to a buyout offer of about $6.9 billion from the private equity firm Kohlberg Kravis Roberts & Co. The deal will take the 8,260-store operator private.
Under terms of the deal, Kohlberg Kravis, a firm that specializes in management buyouts, will pay $22 per share for each Dollar General share. KKR will also assume $380 million in debt as part of the deal, Dollar General said.
While the offer is still subject to shareholder approval, the company's board is recommending that its shareholders vote for it. If approved, the deal could close in the third quarter.
"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 c.e.o. of Dollar General, in a statement.
The deal comes after Dollar General said in November it would close 400 stores, implement massive markdowns, and eliminate an outdated inventory-management system in a major restructuring that was slated to cost about $138 million. At the same time, the company named David Bere, a board member since 2002, president and c.o.o.
The retailer said the changes would improve the appearance of its stores and ultimately result in higher sales and lower employee turnover.
In a research note published yesterday, Raymond James analyst Dan Wewer questioned KKR's plans. "KKR must be assuming a sharp improvement in Dollar General's profitability to justify this valuation," he said. "Importantly, there is not any meaningful underlying real estate for Dollar General. Most of its stores are financed with short-term operating leases."
During fiscal year 2005 (ended Feb. 3, 2006), Dollar General opened 734 new stores, including 29 Dollar General Markets, a food-heavy discount format.