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Watch Grocer Stocks Following Bid From Apollo For The Fresh Market

March 14, 2016 11:19 am
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Shares of specialty grocer The Fresh Market Inc (NASDAQ: TFM) have surged 24 percent after it agreed to be taken private by funds managed by affiliates of Apollo Global Management for about $1.36 billion in cash.

For each share of Fresh Market, Apollo will pay $28.50 that represents a premium of approximately 24 percent over TFM’s closing share price on March 11, 2016. The price also represents a premium of about 53 percent over the Feb. 10, 2016 closing price, the day prior to press speculation regarding a potential transaction.

The deal was unanimously approved by the Board of The Fresh Market, other than Ray Berry, Chairman and Founder of The Fresh Market. Ray Berry and former CEO Brett Berry collectively own approximately 9.8 percent of The Fresh Market’s outstanding shares.

Apollo, which had assets under management of approximately $170 billion as of Dec. 31, 2015, has deep expertise in executing transactions in consumables retailers and brands – such as Sprouts Farmers Market, Smart & Final, Hostess Brands and General Nutrition Centers.

The transaction, which is expected to close in the second quarter of 2016, is conditioned upon the tendering of more than 50 percent of the TFM shares to the offer, and other customary closing conditions. Meanwhile, TFM may consider other bids during a 21-day period until midnight on April 1, 2016.

The deal will be financed primarily through the incurrence of $800 million in new senior secured notes and an equity contribution of approximately $525 million from funds managed by Apollo in addition to the equity rollover from the Berrys. The Fresh Market will also enter into a new $100 million revolving credit facility concurrently with the closing of the merger.

J.P. Morgan Securities LLC is the financial advisor to The Fresh Market, while Barclays, RBC Capital Markets, Jefferies and Macquarie Capital are serving as financial advisors to Apollo. The debt financing is being committed to by Barclays, Royal Bank of Canada, Jefferies Finance and Macquarie.

Founded by Ray Berry in 1982, The Fresh Market is a specialty grocery retailer. As of March 14, 2016, the company operates 186 stores in 27 states across the United States.

Shares of TFM climbed 23 percent at $28.42 on a volume of 12.84 million shares. The 3-month average volume stands at 751.4K shares. The shares have gained 21 percent this year.

Peers Whole Foods Market, Inc. (NASDAQ: WFM) were down 0.3 percent at $32.94 and The Kroger Co (NYSE: KR) slipped 1 percent at $38.28. shares of SUPERVALU INC. (NYSE: SVU) were up 3 percent at $5.78, Weis Markets, Inc. (NYSE: WMK) gained 0.05 percent at $42.50, and Village Super Market, Inc. (NASDAQ: VLGEA) dropped 0.6 percent at $24.26.


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