Cencosud has agreed to acquire a 67 percent stake in The Fresh Market, a specialty food retailer, from Apollo Global Management. According to terms of the deal, Cencosud has agreed to invest $676 million in The Fresh Market while the latter’s existing shareholders, which include Apollo, the Berry family and company management, will retain minority stakes.
Santiago, Chile, May 10, 2022 – Cencosud (BCS: CENCOSUD) a leading South American retailer with operations in Chile, Argentina, Brazil, Peru and Colombia, announced today that it has entered into a definitive agreement with funds managed by an affiliate of Apollo Global Management, Inc. (NYSE: APO) to acquire 67% of The Fresh Market Holdings, Inc. (‘The Fresh Market’ or the “Company”), a premium specialty retailer competing in the food retail industry in the United States of America. Existing shareholders, including the Apollo Funds, the Berry family, and Company management, will retain a minority equity interest in The Fresh Market.
The Fresh Market is a supermarket chain founded in 1982, with headquarters in Greensboro, North Carolina. The Company has 160 stores (100% leased) across 22 states, with an average store size of approximately 21,000 square feet. (equivalent to 1,950 sqm).
The Fresh Market has always been committed to its original values of providing guests with inspiring, fresh food to make everyday eating extraordinary. The Company is a destination for those looking to discover the best and most unique products including convenient, restaurant-quality meals, hand-picked produce, premium baked goods, fresh-cut flowers, custom-cut meats and carefully curated offerings for holidays and special occasions.
With this transaction, Cencosud expands its geographic diversification with approximately 12% of pro forma revenues coming from the United States, a traditionally defensive market with a stable currency. This partnership also provides Cencosud with access to the US markets where there is a much greater depth of capital markets alternatives. In addition, Cencosud will be able to leverage best practices across its Latin American businesses to The Fresh Market, and accordingly incorporate best practices from The Fresh Market to its existing portfolio, helping to drive increased performance and efficiencies. The Fresh Market’s Board of Directors (which Cencosud will have majority representation on) and its existing management team have vast experience in the American retail industry, and management will continue to operate the business and the existing shareholders will retain an equity stake in the Company, thereby contributing to the continued success of The Fresh Market and its strong corporate governance.
The Fresh Market reported revenue of US $1,933 million in 2021 with an adjusted EBITDA of US $196 million and EBITDA margin of 10.2%. Sales consisted of ~70% perishables (vs. 35% in traditional supermarkets), with the fresh-focused offering helping to drive strong EBITDA margin performance and ~15% prepared foods, which is a key driver of growth and profitability.
Cencosud has agreed to invest US $676 million to purchase a combination of primary and secondary equity in The Fresh Market. As a result of the transaction, Cencosud will acquire a 67% stake in The Fresh Market, with the current shareholders owning the remaining 33%. The primary cash component of US $265 million will strengthen the balance sheet of The Fresh Market, reducing the Company’s net leverage to 2.7x EBITDA.
Cencosud will finance the investment primarily through cash on its balance sheet. Post-closing, Cencosud’s gross leverage will be approximately 3.1x and The Fresh Market’s debt will be refinanced to improve its capital structure from an extended maturity and interest rate perspective.