Fairway Group Said to Move Ahead With $200 Million IPO
Fairway Group Holdings Corp. (FWM), the supermarket chain focused on greater New York, plans to push ahead with its U.S. initial public offering next month, seeking as much as $200 million, said people familiar with the matter.
The 12-store chain owned by Sterling Investment Partners will set a price range for the IPO and begin pitching the sale to investors in the first week of April, said the people, who asked not to be named because the process is private.
The grocery chain, which sells organic baby food and local cheeses, is adding stores as more Americans seek natural foods and are more conscious of what they eat. U.S. consumers are increasingly demanding organic natural foods, according to a June 2012 report from IBISWorld Inc., even as U.S. grocery-store sales are forecast to be stagnant over the next four years.
Supermarkets are “shifting toward being more natural and organic,” said Eben Jose, a Boston-based research analyst for IBISWorld. “People are just more aware of how they should be eating.”
Sales at the grocery chain, begun as a small neighborhood market in the 1930s, have climbed for at least three straight years, as it has expanded in suburban New York, New Jersey and Connecticut. Fairway generated revenue of $633 million in the 12 months through December, according to regulatory filings.
Good real estate is “key for getting people in the door,” IBISWorld’s Jose said. “For any grocery store to be successful, because the industry is so saturated, it’s about finding locations that have some opportunity left.”
Fairway competes with conventional grocery chains such as Stop & Shop Cos., organic foodsellers such as Whole Foods Market Inc. (WFM), and specialty stores including Fresh Market Inc. (TFM) Fairway traces its history to 1933 when Nathan Glickberg opened a small fruit and vegetable stand, according to the company’s website.
The stock will list on the Nasdaq Stock Market under the symbol FWM, according to regulatory filings. Credit Suisse Group AG and Bank of America Corp. are leading the IPO. Representatives from Fairway, Sterling, Credit Suisse and Bank of America declined to comment.
Sterling, based in Westport, Connecticut, has invested in middle-market companies for more than two decades, according to its website. The firm will still control Fairway following the offering, according to regulatory filings. They don’t indicate how many shares, if any, Sterling plans to offer in the IPO.
Fairway wrote off $2.1 million of merchandise and $3.4 million of property and equipment destroyed by Hurricane Sandy, the October storm that forced its stores to close temporarily, filings show. One of the locations, in Red Hook, Brooklyn, was forced to close because of flooding and reopened this month, according to filings.
In moving ahead with its IPO, Fairway would follow U.S. companies such as Marin Software Inc. (MRIN), Silver Spring Networks Inc. and West Corp., which all set terms in the past month.
The chain filed for the offering in September using a $150 million placeholder amount. U.S. IPOs have raised $6.6 billion so far this year, more than double the amount in the year-earlier period, as companies from Zoetis Inc. (ZTS) to Norwegian Cruise Line Holdings Ltd. (NCLH) have completed offerings, data compiled by Bloomberg show.
Sprouts Farmers Market LLC, the 50-store grocery chain that’s owned by Apollo Global Management LLC (APO), is considering an IPO, according to three people familiar with the situation. The Phoenix-based seller of all-natural chicken may begin interviewing underwriters for an IPO soon, said one of the people, who asked not to be named because the discussions are private.
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