Apollo to acquire grocery chain for $1.36bn

The transaction involving The Fresh Market will be financed by $800m of new senior secured notes and $525m of equity from Apollo and the rollover of the owners’ stake.

Apollo Global Management is acquiring grocery chain The Fresh Market for about $1.36 billion, according to the company.

An Apollo spokesman told Private Equity International that the transaction is funded by Apollo Investor Fund VIII. The fund, which began fundraising in 2013, is a $18.38 billion vehicle that closed above its $17.50 billion target in January 2014. Investors in the fund include the California Public Employees' Retirement System, Canada Pension Plan Investment Board, Florida State Board of Administration and North Carolina State Treasury, among others, according to PEI's Research & Analytics division.

Apollo is offering to pay $28.50 per share for the NASDAQ-listed company, which represents about 24 percent premium on The Fresh Market’s closing share price on 11 March, the company said. Apollo’s long-term operating partner George Golleher, who formerly ran one of the firm’s portfolio companies, is a co-investor in this deal.

The deal will be financed mainly through $800 million of new senior secured notes and $525 million of equity contributions from Apollo and a rollover of the existing owners’ shares. The Fresh Market chairman and founder Ray Berry and Brett Berry, who together own about 9.8 percent of the company, are participating in a rollover of a “vast majority” of their holdings.

Expected to close in the second quarter, the transaction has a minimum tender condition requiring that over 50 percent of the company’s common shares should be tendered, except for the rollover shares of Ray and Brett Berry.

The Fresh Market has until midnight 1 April to solicit other acquisition proposals with no particular expectation that it will receive a superior proposal than what is offered by Apollo, it said.

JP Morgan Securities is The Fresh Market’s exclusive financial advisor and Cravath, Swaine & Moore and Richards, Layton & Finger its legal advisors. Apollo received financial advise from Barclays, RBC Capital Markets, Jefferies and Macquarie Capital and legal counsell from Davis Polk & Wardwell. It is also receiving legal advise from Morgan, Lewis & Bockius and Morris, Nichols, Arsht & Tunnell, and legal advise specifically on debt financing from Paul, Weiss, Rifkind, Wharton & Garrison.

Barclays, Royal Bank of Canada, Jefferies Finance and Macquarie are providing the debt financing.

Apollo has previously invested in Sprouts Farmers Market, Smart & Final, Hostess Brands and General Nutrition Centers, among others, in this sector. It manages about $170 billion as of 31 December.

Shares of The Fresh Market were $28.45 per unit at press time, up $5.47, or 23.8 percent, from its last closing price of $22.98. It has a market capitalisation of $1.34 billion, according to Yahoo! Finance.