Daily Management Review

Fresh Market to be Bought by Apollo Global for $1.4 Billion


A $1.4 billion deal has been etched between The Fresh Market (TFM)  and Apollo Global Management (APO) where the later would acquire the former, the companies announced on Monday.
Shares of the Greensboro, N.C.-based specialty grocery chain were up 23.76% to $28.43 following the announcement.
Under the acquisition plan, $28.50 per share for their stock would be received by Fresh Market investors. A premium of approximately 53% over the closing price on Feb. 10, the day before initial public speculation about a potential transaction surfaced is being represented by the offer as well as a premium of approximately 24% over the firm's $22.98 closing price on Friday, the companies said.
The Fresh Market had announced a review of strategic financial alternatives and the deal announcement follows that declaration. Apart from chairman and founder Ray Berry, who recused himself from all board discussions on the proposal, the grocery chain's board of directors unanimously approved the deal.
The holdings of Berry and his son, former company CEO Brett Berry, would not be tendered into the tender offer by the New York City-based buyout firm. Both of them together own approximately 9.8% of The Fresh Market's outstanding shares. The companies said that the father son duo would roll over the vast majority of their holdings in the deal.
The companies also announced that the co-investor in the deal would be George Golleher, the former CEO of Smart & Final and Ralphs Grocery Company/Food-4-Less during ownership by other Apollo-affiliated funds.
"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," Rich Noll, the grocery chain's lead independent director, said in a statement issued with the announcement.
Bringing a feeling of old-world charm back to local groceries was the focus of The Fresh Market which was founded in 1982. Samples of newly-brewed coffee, fresh produce and flowers as well as bulk items featured in the company's stores. There are 186 stores in 27 states across the U.S. that The Fresh Market now operates.
Ray Berry was exploring a potential bid to take the company private with assistance from Apollo, a Reuters report in October had said. The Fresh Market had been battling declining same-store sales and competition from Whole Foods and other specialty groceries.
"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," said Andrew Jhawar, an Apollo senior partner and head of the buyout firm's retail and consumer group.
Apollo said that the transaction has fully committed financing in place. One of the conditions of the deal is that at least 50% of the company's shares would be tendered in the offering. The companies expect the transaction to close during the second quarter of 2016.
Until midnight on April 1, alternative acquisition proposals could be actively sought by The Fresh Market according to the deal. The grocery chain said that there can be no assurance that the solicitations will produce a higher offer.