PE Firm Apollo Agrees To Buy The Fresh Market For $1.36B

 

The Fresh Market, Inc., the struggling, upscale specialty retailer, has found a buyer. After speculation about a company sale increased late last year and ramped up about a month ago after reports surfaced that it was listening to offers (including conversations with Kroger and several private equity firms), the Greensboro, NC has agreed to be purchased by an affiliate of PE firm  Apollo Global Management LLC for approximately $1.36 billion.

The $28.50 per share all-cash offer by the Apollo funds represents a premium of approximately 24 percent over The Fresh Market’s closing share price on March 11, 2016, and a premium of approximately 53 percent over the February 10, 2016 closing share price, the day prior to press speculation regarding a potential transaction.

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According to both companies, the announcement follows an open and thorough review of strategic alternatives undertaken by The Fresh Market board of directors to maximize stockholder value. And was unanimously approved by the board, with the exception of Ray Berry, chairman and founder of The Fresh Market, who recused himself from all board discussions related to the review. Ray Berry and his son Brett Berry, who collectively own approximately 9.8 percent of The Fresh Market’s outstanding shares, have agreed not to tender shares held by them in the tender offer and will both participate and roll over 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 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 CEO. “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.”

“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 Fresh Market was founded in 1982 by Ray Berry, a former 7-Eleven executive. As of March 21, 2016, the company operated 186 stores in 27 states. Annual sales are approximately $1.9 billion. It became a publicly-traded company in November 2010