Southeastern Grocers Files to Raise $500 Million in U.S. IPO

Southeastern Grocers Inc., the food-store chain controlled by Lone Star Funds, filed to raise as much as $500 million in a U.S. initial public offering after shares of other chains that went public this year surged.

Citigroup Inc., Credit Suisse Group AG and Deutsche Bank AG are leading the sale, according to a regulatory filing today. The $500 million is a placeholder used to calculate fees and may change.

Southeastern joins grocers including Sprouts Farmers Market Inc. and Fairway Group Holdings Corp. in raising funds this year. When Sprouts went public in July, it became the fourth food retailer to rise 20 percent or more in its initial weeks of trading, according to Bloomberg Industries. Food retail IPOs have outperformed other major industries in the past year as demand for specialty, organic and natural products rises.

“As long as there is a growth element to the story, then investors are attracted to the company,” Joe Feldman, a New York-based analyst at Telsey Advisory Group, said in a telephone interview. “There is also an interest in natural products, and that is driving the market.”

Feldman said grocers tend to generate good cash flow and reward their investors.

Sales at U.S. supermarkets and grocery stores are projected to increase 0.8 percent a year for the next five years and reach about $538.3 billion in 2018, according to an April report from researcher IBISWorld Inc. in Santa Monica, California.

Southeastern Sales

Southeastern generated $8.6 billion in sales last year from stores in states such as Georgia, Alabama, Louisiana and Mississippi. The company has 685 locations under banners including Winn-Dixie and Bi-Lo.

Lone Star, founded by Chairman John Grayken, owns 100 percent of the Jacksonville, Florida-based company’s stock, the filing shows. The company didn’t say whether Lone Star plans to offer shares in the sale or how many.

Sprouts, the Phoenix-based organic grocery chain backed by Apollo Global Management LLC, raised $383 million in its initial public offering, including an overallotment. Fairway raised $204 million in its April IPO with the overallotment. Sprouts has more than doubled since its trading debut, and Fairway gained 92 percent through yesterday.

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