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KKR, Goldman Sell Stake in Dollar General


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Last week, Wall Street Journal reported that private equity (PE) arms of Kohlberg Kravis Roberts & Co. L.P. (KKR - Snapshot Report) and The Goldman Sachs Group, Inc. (GS - Analyst Report) have exited their remaining stake in the discount retailer, Dollar General Corporation (DG - Analyst Report). KKR and Goldman sold their aggregate 4.2 million shares for $60.71 per share.

The sale price was roughly three times Dollar General’s initial public offering (IPO). As an underwriter to the deal, Barclays PLC (BCS - Snapshot Report) purchased these shares and then offered them to the retail investors.

Notably, in Jul 2007, a group of investors including affiliates of KKR, Goldman and Citigroup Inc. had acquired Dollar General for $7.3 billion in an all-stock deal. This turned Dollar General into a private firm. However, in Aug 2009, Dollar General announced an IPO and turned into a publicly traded company again.

Since then, these PE investors have been offloading their stake in Dollar General from time to time. The last disposition was in March this year, when KKR and Goldman sold their interests for $1.75 billion.

With shares of Dollar General trading near its 52-week high, we believe it was the right time for KKR and Goldman to sell their stakes and maximize returns from their investments. Further, on Friday’s (Dec 13, 2013) closing price of $60.48, Dollar General’s shares reflected a year-to-date return of roughly 40.9%.

Further, given the recent rally in equity market, more such exits by PE firms will likely occur going forward. This will enable these PE firms to reap profits from their investments and utilize the cash generated to invest in other companies.

Currently, KKR carries a Zacks Rank #1 (Strong buy), while Goldman holds a Zacks Rank #3 (Hold).

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