South American retailer to buy majority stake in The Fresh Market for $676M

Dive Brief:

  • South American retailer Cencosud has entered into a definitive agreement with funds managed by an affiliate of Apollo Global Management to acquire 67% of The Fresh Market for $676 million, with future potential to reach 100%, according to a statement filed with the Chilean securities regulator SVC Tuesday. The deal is subject to regulatory approval.
  • Existing shareholders, including the Apollo Funds, the Berry family and company management, will remain as minority stakeholders after the deal closes, according to an emailed press release. Cencosud will take a majority representation on The Fresh Market’s board of directors, and the specialty grocer’s management will continue to operate the business. 
  • The acquisition comes after The Fresh Market filed for an initial public offering in July. Its performance has improved since Apollo bought the grocer in 2016 and took it private.  

Dive Insight:

The majority acquisition of The Fresh Market marks the latest step in a journey that’s seen the specialty grocer go from the public markets to a multi-year improvement plan under private equity ownership.

Under Apollo Global Management, the grocer has focused on improving store productivity and playing up its specialty roots. This includes focusing its merchandising efforts on fresh food and restaurant-quality meals while also remodeling stores to have the feel of an “Old World European marketplace” and offer “high-touch guest service,” the company noted in a recent S-1 filing with the Securities and Exchange Commission. 

The Fresh Market has also expanded its e-commerce, with Instacart delivery across its footprint and curbside pickup offered at all of the company’s 159 stores. In March, the company launched its first-ever loyalty program.

Like other grocers, The Fresh Market saw sales balloon in 2020, with comparable sales growing 22.3% during the fiscal year, according to the SEC filing. During the first three quarters of 2021, comps increased 3.2%.

Apollo incurred significant debt to finance its 2016 acquisition — an amount that stood at $933 million as of October 31, according to the SEC filing. Wednesday’s acquisition announcement noted that $265 million in cash of Cencosud’s purchase price will go toward strengthening The Fresh Market’s balance sheet, reducing the grocer’s net leverage to 2.7 times earnings before income taxes, depreciation and amortization (EBITDA). 

The Fresh Market’s debt will be refinanced to improve its capital structure from an extended maturity and interest rate perspective,” according to the announcement.

In 2020, The Fresh Market named Jason Potter, a former executive with Canadian grocer Sobeys, as its CEO. He replaced former chief executive Larry Appel. In January, the company named Adrian Bartella, an executive with experience guiding companies to the public markets, as its chief financial officer.

The Fresh Market filed an S-1 registration with the SEC for an initial public offering last March and has updated the form every few months, with the latest coming on March 14. It’s unclear if new majority owner Cencosud will continue that push toward the public markets. 

Cencosud operates a variety of different retail stores across five countries in South America. This includes department stores, home improvement stores and shopping malls. In addition, the company runs business ventures that complement its retail operations, including financial services and insurance brokerage, according to its website.

Earlier this month, Cencosud signed a deal to acquire Brazilian cash-and-carry supermarket chain Giga for $100 million.