Apollo to Buy Grocer Fresh Market for $1.4 Billion in Cash

  • Shareholders will receive $28.50 a share in tender offer
  • Apollo's third deal of more than $1 billion this year

Apollo Global Management LLC agreed to buy grocer The Fresh Market Inc. for about $1.4 billion in cash, marking the buyout firm’s third announced acquisition of more than $1 billion since the start of February.

Shareholders will receive $28.50 a share, the companies said in a statement Monday. The offer is 24 percent above Fresh Market’s closing price on Friday.

The deal marks a return to the grocery business for Apollo, which has previously owned Sprouts Farmers Market Inc. and Smart & Final Stores Inc. For Fresh Market, the buyout may help it make the investments needed to reignite its sale growth, which has slowed since its 2010 IPO amid mounting competition from larger rivals such as Kroger Co. and Wal-Mart Stores Inc.

Reports surfaced in October that Fresh Market had turned to Apollo for help exploring a buyout, and Kroger had also been mentioned as a potential suitor.

Fresh Market’s board conducted an “open and thorough review” of strategic alternatives before agreeing to the sale, according to the statement. Still, the Greensboro, North Carolina-based company can solicit better offers for 21 days after signing a definitive deal, the companies said.

Founder Remains

Ray Berry, who founded the company in 1982, and his son, Brett Berry, won’t tender their shares and will roll over the “vast majority” of their stakes in the transaction with Apollo. They collectively own about 9.8 percent of the stock.

Fresh Market shares rose as much as 24 percent to $28.47 in New York trading, the biggest intraday gain since November 2010. The price still is below Apollo’s offer, indicating investors don’t expect the company to receive a higher bid.

Fresh Market had made it known for several months that it was interested in a buyout, giving potential buyers ample opportunity to examine the business, said Jennifer Bartashus, an analyst at Bloomberg Intelligence.

“I’d be surprised if a better offer came in,” she said. “The price is fairly generous given that there’s a substantial amount of investment that has to take place to get its sales growth back.”

Kroger Opportunity?

Fresh Market, with 42 of its roughly 170 stores in Florida, could have made sense as an acquisition target for Kroger, which only has one store in that state, Bartashus said. But Kroger is still working to integrate the Roundy’s chain it agreed to buy last year.

JPMorgan Chase & Co. is advising Fresh Market, and Cravath, Swaine & Moore LLP and Richards, Layton & Finger P.A. are its legal advisers. Barclays, RBC Capital Markets LLC, Jefferies and Macquarie Capital are Apollo’s financial advisers. Morgan, Lewis & Bockius LLP and Morris, Nichols, Arsht & Tunnell LLP are legal advisers to Apollo and Paul, Weiss, Rifkind, Wharton & Garrison LLP is acting as legal adviser to Apollo as it relates to the debt financing.

This is Apollo’s third major deal of the year. The firm agreed Feb. 8 to buy Apollo Education Group Inc. for $1.1 billion, and on Feb. 16 it it said it would acquire home-security monitoring company ADT Corp. for about $6.9 billion.

Fresh Market reportedly sought out Apollo in October because of the firm’s experience with Sprouts and Smart & Final. That grocery knowledge should help Fresh Market get back on track, said Joseph Feldman, and analyst at the Tesley Group.

“They need a more distinct point of view,” he said. “It’s a highly competitive market out there.”

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