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One of the land's dollar store chains has been sold, as Dollar General (NYSE:DG)has agreed to be taken private by equity firm Kohlberg Kravis Roberts & Co. for $6.9 billion. KKR plans to speed up the chain's existing plans to close stores in order to boost profit. Dollar General is the retailer with the most stores open in the U.S., with about 8,260 discount stores all across the nation. Many stores are located in rural towns and sell food, cleaning supplies and household goods. Yes, there are towns where Wal-Mart (NYSE:WMT)and Target (NYSE:TGT)stores don't exist --- and Dollar General's strengths are in those markets. The problem is not all are making the chain a decent enough profit.
In the last seven years, Dollar General has literally doubled its store count, and with that came slower and declining profits. Wal-Mart starting pecking away at Dollar General's profit as more and more customers apparently opted to shop at only one discounter for all their needs. Dollar General also said late last year that it would close down about 400 stores and slow its expansion. This LBO will allow Dollar General to do what they need to in order to restore profit without quarterly results pressure from the market. I believe this is a good move.
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Reader Comments (Page 1 of 1)
3-13-2007 @ 4:39PM
Carter Powers said...
Visual Map: KKR Leverages Former Relationships to Acquire Dollar General
Kohlberg Kravits Roberts & Co (KKR) is using its relationships from former successful deals to drive its current deal-flow. The most recent example of this is the acquisition of Dollar General. An IntellectSpace analysis of common connections between KKR and Dollar General reveals that the two firms are quite connected. The primary relationships between them are via Safeway, Kraft, Beatrice Co, Bruno Inc, and several universities.
Taking a closer look at the two firms’ common connections, it is likely that the acquisition discussions were spurred and led by those relationships involving Bruno’s Inc. Relationships involving this company include:
- James Hagan was the CFO of Dollar General for many years, and was the CFO of Bruno’s Inc prior to his position at Dollar General
- Kravis, Roberts, & Raether all served on the board of Bruno’s while Hagan was the CFO
However, Dollar General’s former President and COO, Lawrence Jackson, may have also played a key role. Jackson spent much of his career at Safeway, where 5 KKR professionals assumed board seats – among those 5 professionals were Kravis and Roberts. Both Kravis and Roberts assuredly had relationships with both Hagan and Jackson, so the high-level discussions likely involved these 4 individuals.
Lastly, Lawrence Jackson attended Harvard Business School, along with at least 4 KKR professionals. Since HBS students are typically strong networkers, it is very possible that HBS alumni played a role in facilitating this deal.
To view an interactive version of the IntellectSpace Knowledge Map, please use a PC-based Internet Explorer to view the following URL: http://fn.intellectspace.com/ispace/GuestMonitor.aspx?id=e9dcb68f-a0e1-421f-85f7-f7534c7483f2