8-KRegulation FDOther EventsExhibits & Filings

DOLLAR GENERAL CORP 8-K Report, Regulation FD Disclosure (Jun 18, 2007)

Filed June 18, 2007For Securities:DG

Summary

This Form 8-K filing by Dollar General Corporation on June 18, 2007, primarily discloses financial information and details related to a significant corporate transaction: the proposed merger with Buck Acquisition Corp., a subsidiary of Buck Holdings, L.P., which is controlled by Kohlberg Kravis Roberts & Co. (KKR). The filing details the "Sources and Uses of Funds" for this "Merger and Transactions," outlining a multi-billion dollar financing structure involving new senior secured credit facilities, the issuance of various notes (Senior Notes, Senior Toggle Notes, Senior Subordinated Notes), and significant equity contributions from investors. It also touches on management's participation and equity opportunities for other employees. The "Unaudited Pro Forma Condensed Consolidated Financial Information" provides a projected financial snapshot of Dollar General post-merger, indicating a substantial increase in long-term debt and significant adjustments to assets and equity due to purchase accounting. Notably, the pro forma statements show a projected net loss for the fiscal year ended February 2, 2007, and shorter interim periods, driven by increased interest expenses and purchase accounting adjustments. The filing also includes a reconciliation of Net Income to EBITDA and Adjusted EBITDA, highlighting the significant debt load and the impact of financing costs on profitability. The company's Board of Directors stated they would remain neutral on a tender offer for the company's notes, which is part of the overall transaction financing. Investors should focus on the substantial debt increase and the projected shift to a net loss position on a pro forma basis, largely due to interest expenses associated with the leveraged buyout. The significant goodwill recognized under purchase accounting also warrants attention. While the transaction is structured to involve substantial debt financing, the filing provides details on the components of this financing and the projected financial impact, offering insight into the company's financial structure following the acquisition.

Key Highlights

  • 1Dollar General Corporation is undergoing a merger with Buck Acquisition Corp., a subsidiary of Buck Holdings, L.P. (controlled by KKR), as detailed in the March 11, 2007 Merger Agreement.
  • 2The "Transactions" (including the merger) are financed by approximately $7.58 billion in sources, including significant new debt issuance ($3.9 billion in notes and $2.7 billion in credit facilities) and a substantial equity contribution of $2.77 billion from investors.
  • 3The pro forma balance sheet as of May 4, 2007, shows a substantial increase in long-term obligations to $4.7 billion, reflecting the new debt structure, and significant goodwill of $4.3 billion due to purchase accounting.
  • 4Pro forma statements of operations indicate a projected net loss for the fiscal year ended February 2, 2007 ($147.2 million) and interim periods, driven by a significant increase in pro forma interest expense (from $34.9 million to $436.6 million year-over-year).
  • 5The company's Board of Directors announced neutrality regarding a tender offer and consent solicitation for its 8 5/8% Notes due 2010, which is part of the overall transaction financing.
  • 6Senior management and other employees will have opportunities to invest in Dollar General's equity in connection with the merger.
  • 7The filing provides detailed reconciliations of Net Income to EBITDA and Adjusted EBITDA, with pro forma total debt to Adjusted EBITDA ratio of 7.1x for the 52 weeks ended May 4, 2007.

Frequently Asked Questions

This filing primarily serves to disclose financial information and details concerning Dollar General's proposed merger with Buck Acquisition Corp., a subsidiary of Buck Holdings, L.P. (controlled by KKR). It outlines the financing structure for the transaction, provides pro forma financial statements reflecting the expected post-merger financial condition and results, and details the associated debt and equity components.

The acquisition is being financed through a combination of debt and equity. The 'Sources and Uses of Funds' table indicates total estimated uses of $7.58 billion, including a $7.0 billion purchase price. The financing includes approximately $3.9 billion in new notes (Senior, Senior Toggle, and Senior Subordinated), $2.7 billion from a new senior secured term loan facility, and $2.77 billion in equity contributions from investors. There is also a $1.0 billion revolving asset-based credit facility, with $302.3 million drawn in the pro forma statement.

Pro forma financial statements project a significant increase in interest expense due to the substantial new debt, leading to a projected net loss for the fiscal year ended February 2, 2007 ($147.2 million) and subsequent interim periods. The balance sheet shows a much higher level of long-term obligations and significant goodwill recognized under purchase accounting.

Dollar General's Board of Directors has unanimously confirmed its decision to express no opinion and remain neutral toward the tender offer made by Buck Acquisition Corp. for Dollar General's outstanding 8 5/8% Notes due 2010 and the related consent solicitation.