Wednesday, February 16, 2011

Breaking: Smart & Final Enters Into Agreement to Sell Henry's to Sprouts Farmers Market

Fresh & Easy Buzz's 'The Insider' columnist nailed it in his column yesterday, as he essentially has since January 5, 2011. [See - February 15, 2011: Sprouts Farmers Market's Acquisition of Henry's to Be Announced This Week, As Early As Wednesday. Also: January 5, 2011: 'The Insider' - Will 2011 See Sprouts Farmers Market Acquiring Henry's Farmers Market? 'The Insider' Says it Could Be in The Cards.]

Below (in italics) is the announcement made today by City of Commerce, California-based Smart & Final regarding the acquisition of its Irvine, California-based Henry's Farmers Market chain by Arizona-based Sprouts Farmers Market.

LOS ANGELES, Feb. 16, 2011 - "Smart & Final Stores LLC today announced that an agreement has been reached by Smart & Final to sell its Henry's Farmers Market subsidiary to Sprouts Farmers Market. Private equity firm Apollo Management L.P. ("Apollo") will be the majority owner of the combined Sprouts-Henry's company. Apollo will also remain the principal equity owner of Smart & Final.

The sale of Henry's provides Smart & Final with a healthy financial return on our 3 1/2 year investment in the Henry's stores, and the cash proceeds will further deleverage our already strong balance sheet. Smart & Final is a dynamic company with solid growth prospects in each of our store banners," said Dave Hirz, president of Smart & Final. "With our steady cash flow and an undrawn $150 million revolving credit facility, we have ample liquidity to actively reinvest in our business with a 2011 capital program that includes at least two new stores and over 40 store remodeling projects. I believe the outlook for our company is very positive."

The proposed transaction is expected to close by the end of the first quarter 2011, and Smart & Final will continue to support its 43 existing Henry's Farmers Market and Sun Harvest stores with various administrative services for an extended period after closing through a transition services agreement.

As closely held companies, Smart & Final and Sprouts do not disclose financial information. Specific terms of the transaction were not disclosed.

Originally founded in 1871 in downtown Los Angeles, Smart & Final Stores LLC operates approximately 250 retail stores, excluding the Henry's & Sun Harvest banners. Under the Smart & Final, Smart & Final Extra!, Smart Foodservice Cash & Carry and SmartCo Foods banners, the company operates non-membership warehouse stores for food and foodservice supplies in California, Oregon, Washington, Arizona, Nevada, Idaho and northern Mexico.

As we've reported since January 5, 2011, when 'The Insider' broke the news of the deal talks, private equity firm Apollo Global Management has been the key player in the financial aspect of the deal. As 'The Insider' noted in his piece yesterday: "Representatives of Phoenix, Arizona-based Sprouts Farmers Market and Smart & Final-owned Henry's Farmers Market, which is headquartered in Irvine, California, are set to announce they've reached a deal in which Sprouts will acquire the Henry's chain outright or in some form of an acquisition/merger-type deal, my sources tell me."

As the announcement from Smart & Final says, "Private equity firm Apollo Management L.P. ("Apollo") will be the majority owner of the combined Sprouts-Henry's company." The key term is majority owner. Sprouts Farmers Market will run the combined chain, which will have 98 stores in California, Nevada, Arizona, Colorado and Texas.

If you read through the reporting in Fresh & Easy Buzz at the links below - from January 5 -to- the present, you'll see frequent mention of such a hybrid acquisition/merger as being part of the deal discussions, and ultimate agreement, between the representatives for Sprouts and Henry's.

'The Insider' will have some analysis and comments on the deal announced today in a soon to be published column.

Additionally, as regular readers are aware, Fresh & Easy Buzz has reported on and written about both Sprouts Farmers Market and Henry's Farmers Market extensively. Look for more of our reporting and analysis upcoming, now that the two chains are set to become one.

The Sprouts-Henry's deal talks: Follow the story at the links below

~January 5, 2011: 'The Insider' - Will 2011 See Sprouts Farmers Market Acquiring Henry's Farmers Market? 'The Insider' Says it Could Be in The Cards

~January 7, 2011: 'The Insider' - Sprouts Farmers Market-Henry's Farmers Market Deal Negotiations Continue; End-Game Could Be Near

~January 8, 2011: Smart & Final-Henry's Tell Employees About Deal Discussions With Sprouts Farmers Market; Confirming 'The Insider's' Reports

~January 10, 2011: Sprouts Farmers Market to Open Second Northern California Store in Roseville No Later Than Mid-April

~January 11, 2011: 'The Insider' - A 'New York State of Mind': 'The Insider' On Walmart, Apollo Global Management, Tesco's Fresh & Easy and the NRF in New York City

~January 24, 2011: 'The Insider' - End-Game Could Be Near in the Sprouts Farmers Market-Henry's Farmers Market Deal Talks

~January 30, 2011: 'The Insider' - The Sprouts & Henry's Deal Talks: Smart & Final is Looking Like A Retailer That Wants to Make A Deal

~February 4, 2011: 'The Insider' - The UFCW Union Becomes A Player in the Sprouts-Henry's Acquisition Talks...As the Two Chains Move Closer to A Deal

~December 11, 2010: Smart & Final's Not So Marvelous SmartCo Foods' Misadventure in Denver

~November 17, 2010: Smart & Final Pulls the Plug On All Five SmartCo Foods Stores in Metro Denver After Being Open Less Than Five Months

~Also: Read more about , , and by clicking on the respective links. Use the "older post" and "newer post links at the bottom of each linked page for additional pages/stories.

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