Chilean retail organization Cencosud announced that it has agreed to acquire a 67 percent stake in The Fresh Market from affiliates related to private equity firm Apollo Global Management. The price for its stake is $676 million, and it marks the company’s first entry in the U.S. retail grocery market.
According to a statement filed with the Chilean securities regulator SVC, the agreement also establishes the possibility that Cencosud Internacional’s stake in the retailer could increase to 100 percent in the future.
The deal, which must be finalized by U.S. regulators, would be financed by a combination of cash, debt and working capital. At a news conference announcing the deal, Cencosud CEO Matias Videla said that 60 percent of the purchase price would come from cash generated from Cencosud businesses and 40 percent from additional debt.
The multi-format retailer, currently does business in six countries in South America: Chile, Argentina, Peru, Colombia and Brazil. In addition to supermarkets, the company operates home improvement and construction stores, department stores, financial services stores and shopping malls and has 140,000 employees.
Jason Potter, CEO of The Fresh Market, noted, “Cencosud has demonstrated that it is a world-class retailer with exceptional margins, and we look forward to sharing best practices across our businesses. The Fresh Market has experienced strong financial momentum over the last few years and this partnership with Cencosud will allow the company to further capture market share as we expand our footprint in our core Southeast market and beyond. Our entire team looks forward to the partnership with the Paulmann Family, Matias (Videla) and the team at Cencosud.”
According to Cencosud, this transaction expands the company’s geographic diversification with approximately 12 percent of pro forma revenues coming from the United States, “a traditionally defensive market with a stable currency.”
Heike Paulmann is the chairwoman of the board.
Cencosud further stated, “This partnership also provides Cencosud with access to the U.S. markets where there is a much greater depth of capital markets alternatives. In addition, Cencosud will be able to leverage best practices across its Latin American businesses to The Fresh Market, and accordingly incorporate best practices from The Fresh Market to its existing portfolio, helping to drive increased performance and efficiencies.”
The Fresh Market, founded in 1982 in Greensboro, NC by former 7-Eleven executive Ray Berry, currently operates 160 stores in 22 states and had 2021 revenues of $1.93 billion with an adjusted EBITDA of $196 million and EBITDA margin of 10.2 percent.
The upscale specialty market chain was acquired by private equity firm Apollo Management Group for $1.36 billion in March 2016.
In March 2021, for the second time in slightly more than a decade, the merchant sought to become a publicly-traded company, submitting a Form S-1 draft registration statement with the Securities and Exchange Commission relating to the proposed initial public offering of its common stock. When it first went public in November 2010 with an IPO valued at $290, it operated 100 stores in 20 states.
Upon finalization of the deal with Cencosud, existing shareholders, including Apollo, the Berry family and the company’s management, will retain a minority 33 percent stake in the Fresh Market.
The deal to acquire The Fresh Market is the second that Cencosud has made recently. The company announced the purchase of the Giga cash & carry chain in Sao Paulo, Brazil for $100 million.