Bids for Apollo’s Smart & Final Due Later this Month; Centerbridge, Ares Still in the Mix

Final bids for Smart & Final, which is backed by Apollo Global Management, are due later this month, sources tell peHUB.

Centerbridge Partners and Ares Management are still vying for the grocery retailer, persons say.

New York-based Apollo put Smart & Final up for sale over the summer, sources have told peHUB. Morgan Stanley is advising on the process, persons say. The company has about $100 million in annual EBITDA, according to mergermarket, which first reported the sale.

Smart & Final will likely sell for 8x to 9x EBITDA, one banker says, while a second banker says that valuation is too high. Smart & Final will probably go for 7x, the second source says.

“It will most certainly be sold at a discount to where Costco is trading, which is 10x to 11x,” the first banker says. “Part of the challenge is that [Smart & Final] has monetized a fair amount of real estate which makes it less valuable.”

Ares, because it owns 99 Cents Only Stores, likely has the upper hand in the auction, the first banker says.

Commerce, Calif.-based Smart & Final, a warehouse grocery provider, operates 247 nonmembership club stores in six Western states and northern Mexico under the Smart & Final and Cash & Carry names. Smart & Final generates about $2.4 billion in revenue, The Deal said in June (citing Forbes).

Apollo acquired Smart & Final in 2007 in an $890 million deal. The PE firm invested $272 million equity, Moody’s Investors Service reported at the time. Smart & Final, later that year, bought 27 Henry’s Farmers Market stores and 8 Texas Sun Harvest stores for a reported $166 million. In 2011, Apollo acquired a majority stake in Sprouts and combined Henry’s/Sun Harvest with Sprout. Since 2011, Smart & Final has cut its leverage by nearly $400 million, Moody’s reported in May.

According to The Deal, Apollo had wanted to roll up Smart & Final with 99 Cents Only Stores, which was up for sale last year. Apollo couldn’t put financing together for 99 Cents and the company ultimately was sold to Ares and Canada Pension Plan Investment Board for $1.6 billion.

Apollo declined comment. Smart & Final, Ares and Centerbridge could not be reached for comment.

–Olivia Oran contributed to this story. 

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