Discount retailer Dollar General Corp, backed by powerful private equity firm Kohlberg Kravis Roberts & Co , filed for an initial public offering of up to $750 million on Thursday, according to a regulatory filing.

It could be one of the largest IPOs of the year and among the biggest exits through a public stock offering by a private equity firm since the credit crunch sapped investor appetite for new offerings.

The IPO market has been improving since the spring, as stock markets have rallied. So far this year there have been 17 IPOs of companies, raising $4 billion.

The lead bookrunners on the Dollar General offering will be Citi , Goldman Sachs & Co , Bank of America Merrill Lynch , JPMorgan , as well as KKR itself.

Dollar General said it expected to pay a special dividend of $200 million to existing investors prior to the offering. That would include KKR, the pension and endowment funds that invested in KKR's funds, and others that invested in Dollar General when KKR struck the $7.3 billion deal to buy the firm in July 2007.

KKR's current investment in Dollar General is valued about $2 billion, or 1.7 times the cost of its original investment, according to calculations by Reuters based on recent documents the company has filed.

KKR bought Dollar General along with GS Capital Partners, Citi Private Equity, and other co-investors.

Dollar General did not specify how much it expects the IPO to yield but said it planned to use the proceeds to pay down debts and notes.

It's a strong cash generator that can perhaps justify such a debt burden, said Matt Therian, a research analyst with Connecticut-based investment firm Renaissance Capital.

Even though things are looking better, being on the discount end of the retailer spectrum will help.

By Renaissance Capital's initial estimates and comparisons to industry peers, the company could be worth as much as $8 billion to $10 billion.

An IPO of the retailer had been expected. A source familiar with the situation previously told Reuters that advanced preparations were in place to take the Tennessee-based company public, which could happen in the late third quarter or fourth quarter. Dollar General did not specify timing of the IPO in the filing.

A successful IPO is particularly important for KKR, which is itself looking to join rival Blackstone Group in becoming a publicly traded company through a complex transaction that involves combining with its Amsterdam-listed fund KKR Private Equity Investors (KPE).


It follows the successful $745 million IPO of KKR-backed Avago Technologies Ltd , one of the largest and best performing IPOs of the year whose shares closed 18.4 percent above their IPO price on Thursday.

An IPO of another KKR-backed firm, hospital company HCA, is also being considered, a source familiar with the situation previously told Reuters.

Plans for HCA, however, are unlikely to get off the ground until there is more clarity around the Obama administration's reform of healthcare, that source said at the time.

In the prospectus, Dollar General said it had substantial debt including a $2.3 billion senior secured term loan facility which matures on July 6, 2014, $1.175 billion of senior notes and $655.9 million of senior subordinated notes.

For the quarter ended May 1, 2009, Dollar General had net sales of $2.8 billion, up 15.6 percent over the year earlier profit, and made a profit of $83 million.

Dollar General said in its prospectus that it is the largest discount retailer in the United States by number of stores, with 8,577 stores in 35 states as of July 31, 2009.

(Reporting by Megan Davies and Phil Wahba; Editing by Matthew Lewis, Phil Berlowitz)