The Fresh Market has agreed to be acquired by a private equity firm several months after the retailer said it would initiate a review of strategic alternatives and a possible sale.
The struggling grocery chain said it has entered into an agreement with Apollo Global Management, LLC whereby it will acquire The Fresh Market for approximately $1.36 billion. The Fresh Market has been struggling with declining sales through several quarters, and customers have complained about high prices. Recently it had launched an effort to promote "lower prices."
The transaction was unanimously approved by the board of directors of The Fresh Market, other than Ray Berry, chairman and founder of The Fresh Market, who recused himself from all board discussions related to the review and from the board vote approving the transaction.
“We are excited about this transaction with Apollo, which recognizes the value of The Fresh Market’s strong brand and significant growth prospects while providing stockholders with an immediate and substantial premium,” said Rick Anicetti, The Fresh Market’s President and Chief Executive Officer. “Apollo is a highly-regarded investor, bringing deep industry expertise and financial resources, and we look forward to working with them to build on our progress in achieving our strategic plan to deliver long-term profitable growth.”
Ray Berry and Brett Berry, who collectively own approximately 9.8% of The Fresh Market’s outstanding shares, have agreed not to tender shares held by them into the tender offer and will both participate and rollover the vast majority of their holdings in the transaction with Apollo. In addition, George Golleher, with whom Apollo has had a long-term operating partner consulting relationship and who was formerly Chief Executive Officer of Smart & Final and Ralphs Grocery Company/Food-4-Less during ownership by other Apollo affiliated funds, will be a co-investor with the Apollo funds in the transaction.
“We are pleased to have reached this agreement with Apollo, which follows a comprehensive review of strategic and financial alternatives that generated interest from numerous parties. After an open and thorough process, our board concluded that this offer maximizes value for our stockholders,” said Rich Noll, The Fresh Market’s lead independent director.
“We are delighted about this transaction with The Fresh Market, which was one of the early pioneers in small-box grocery, offering unique, delicious and healthy food with a keen focus on perishables,” said Andrew S. Jhawar, Senior Partner and Head of the Retail and Consumer Group at Apollo. “We believe there is a significant opportunity to enhance the brand, merchandise offering and price-value combination to make The Fresh Market a primary destination for food shoppers, while at the same time being committed to social responsibility through partnerships with local vendors and communities. Our team at Apollo has had the tremendous fortune of having executed transactions in several consumables retailers and brands – such as Sprouts Farmers Market, Smart & Final, Hostess Brands and General Nutrition Centers, among others – that have undergone significant transformations under our strategic guidance and we intend to bring that experience to bear at The Fresh Market. We look forward to partnering with Ray Berry, Brett Berry and George Golleher, and beginning our discussions with the executive management team and the over 13,000 team members at The Fresh Market so that we can assist the company in delivering the most inspiring and engaging food shopping experience in the industry with best-in-class customer service.”
The transaction – which is expected to close in the second quarter of 2016 – is conditioned upon satisfaction of the minimum tender condition which requires that shares representing more than 50 percent of the company's common shares (other than shares held by Ray and Brett Berry that are being rolled over) be tendered, the receipt of approval under the Hart-Scott-Rodino (HSR) Antitrust Improvements Act of 1976 and other customary closing conditions.
Under the terms of the Merger Agreement, the company may actively solicit alternative acquisition proposals during a 21-day period following the execution date of the definitive agreement, continuing until midnight on April 1, 2016. There can be no assurances that this process will result in a superior proposal, and The Fresh Market does not intend to discuss any developments with regard to this process unless and until the company's board of directors makes a decision with respect to any potential superior proposal.
The transaction has fully committed financing in place. It will be financed primarily through the incurrence of $800 million in new senior secured notes and an equity contribution of approximately $525 million from funds managed by Apollo in addition to the equity rollover from the Berrys. The Fresh Market will also enter into a new $100 million revolving credit facility concurrently with the closing of the merger.
Founded by Ray Berry in 1982, The Fresh Market operates 186 stores in 27 states across the United States.