Scoop Confirmed: Sprouts Announces Acquisition of Sunflower Farmers Market

The Insider - Heard On the Street

Phoenix, Arizona-based Sprouts Farmers Market and Colorado and Arizona-based Sunflower Farmers Market decided to give the tens of thousands of attendees at the natural-organic products' industry's largest annual trade show on the west coast, Expo West, which began in earnest today in Anaheim, a little something to talk about on the show floor and in the always jam-packed area bars and restaurants this weekend.

It's also something the tens of thousands of you who've been reading my reporting about the deal between Sprouts and Sunflower since November 2011 have been waiting for - and which you learned about in Fresh & Easy Buzz months in advance of today because the publications writing about it today are doing so for the first time based on the press release - which is the announcement Sunflower Farmers Market is being merged into Sprouts, which will result in one farmers' market-style chain in the U.S. - Sprouts Farmers Market.

Today Sprouts and Sunflower announced they've reached a definitive agreement to merge Sunflower Farmers Market and its 35 stores into Sprouts Farmers Market, creating a chain of 139 stores with an estimated annual revenue of $2 billion, which is about the total annual sales amount I estimated in my past columns the combined chains would generate.

Like it did with the Henry's Farmers Market deal last year, Sprouts Farmers Market, which is majority-owned by private equity firm Apollo Global Management and has about 200 mostly individual investors, is essentially acquiring Sunflower Farmers Market, although the retailer's are using the term merged. Sunflower will become part of Sprouts. It's identity and name will go away. Apollo will remain the majority and controlling owner of the combined company, Sprouts Farmers Market.

In the announcement today, Sprouts CEO Shon Boney said the deal is expected to close, pending regulatory approval, in the second quarter of this year, which is soon.

He also said the 35 Sunflower Farmers Market stores will be re-branded under the Sprouts banner by the end of 2012, following the same strategy and about five-month time frame Sprouts used in re-branding the Henry's units to the Sprouts' banner in 2011.

Two stores in Temecula, California remain under the Henry's Farmers Market banner because an existing independent natural foods' retailer in the city, Sprouts Natural Market, has filed a lawsuit in Riverside County Superior Court seeking to prohibit Sprouts Farmers Market from changing the names of the two Henry's stores. Until a ruling is made by the court, Sprouts Farmers Market can't re-brand the two units in Temecula from Henry's to Sprouts.

Sunflower's headquarters operations in Colorado (Boulder and Denver) and Arizona (Phoenix) will also be folded into Sprouts corporate headquarters in Phoenix, as was the case with Henry's headquarters in Irvine, California. Like in the Henry's case, Sunflower's offices will remain open for a while but be closed before the year is out.

The combined chain also plans to open up to 13 new stores this year, as I've previously reported. Those stores will all be under the Sprouts Farmers Market banner, Boney said today.

Sunflower also extends Sprouts Farmers Market Farmers into Nevada, Utah, New Mexico and Oklahoma, states where Sunflower has stores but Sprouts' doesn't, along with adding units in California, Arizona, Colorado, where Sprouts currently operates its 104 stores.

Here's what Andrew S. Jhawar, a senior partner at Apollo and the co-head of its Consumer and Retail Industry Group, said about the deal in the announcement release today: "We feel incredibly fortunate to be able to bring together the management and operations of these two growth-oriented grocery retailers who focus on natural and organic products. In doing so, Sprouts will become an even better company offering more value to the nearly 1.5 million customers who regularly shop at the combined company's stores," he said.

"This is a combination that makes great sense given the rapid growth in demand for natural and organic products and the complementary nature of the geography of the two companies. Apollo is excited to support Sprouts' dynamic management team and to help the company prepare for continued growth throughout the United States," the Apollo Global Management senior partner added.

Jhawer played a key role in doing the deal, which is part of Apollo's plans to dramatically grow Sprouts Farmers Market, which is began doing in earnest last year when it merged Henry's, which it owned through its Smart & Final grocery retailing company based in Southern California, into Sprouts, gaining majority ownership in Sprouts Farmers Market as part of the deal.

Stan and Shon Boney, who remain investors in Sprouts and are two of its founders, will continue to be Sprouts Farmers Market's two senior-level executives. Stan Boney is chairman. Shon Boney, Stan's son, is CEO.

Doug Sanders is responsible for the day-to-day operations of Sprouts as its president. He remains in that position. Chris Sherrell, president and CEO of Sunflower Farmers Market, is expected to join Sprouts Farmers Market in a senior capacity.

When I first reported on the negotiations between Sprouts and Sunflower on November 6, 2011, I said the the Sprouts'-Henry's deal was roll up number one in terms of what were the then three competing farmers market-style grocery chains in the western U.S. The deal to merge Sunflower Farmers Market, which became Sprouts' only remaining identical-format competitor after the Henry's deal a year ago, into Sprouts Farmers Market is roll up number two, as I called it in my November 6, 2011 column here.

Sprouts Farmers Market has created a special website to announce the deal with Sunflower, which is identical to the site it set up to announce the Henry's Farmers Market deal.

That website is here. You can read the general announcement about the deal here. The press release statement distributed to the media today is here.

And, in case you're wondering, two of the founders of Sunflower Farmers Market, Libby Cook and Randy Clappnot, who are known only to those of us who work in the industry or who follow it very closely, were mentioned in the deal announcement today.

But that other co-founder, Michael Gilliland, the man who was the CEO and the public and media face of Sunflower Farmers Market from its founding in 2002 until early February 2011, when he resigned after being arrested February 10, 2011 and charged with one count of felony child prostitution as the result of a sting operation conducted by the Phoenix police department, was omitted, which is an omission one can hardly blame - or be surprised about - the board members and CEO's of Sprouts' and Sunflower from making.

Gilliland and Forman have filed motions for and received a series of continuances in his trial over the last year. In fact, the two appeared in the Maricopa County, Arizona Superior Court yesterday for a pre-trial conference, where he was granted a continuance. He was set to go to trial March 15. But it appears the trial has been postponed to April 12, as you can see here.

But considering from 2002, when Sunflower was founded, up until February 9, 2011, the day before his arrest, Michael Gilliland was that public face of Sunflower Farmers Market, it's a bit surreal, at least to those of us who work in the industry or who follow it very closely, to see no mention of him, for obvious reasons, in an announcement of this sort.

Perhaps there's an object lesson in it for the food retailing industry, which is: Avoid using an individual as the public face of your grocery chain or even of a major marketing campaign because the potential downside of doing so can be severely damaging, although in Sunflower Farmers Market's case its board and CEO Chris Sherrell have managed the situation well. Instead, let your stores be the face of the chain to the public.

I'll have more to say about the Sprouts-Sunflower deal in an upcoming column. But for now I'm going to bask in Fresh & Easy Buzz's scoop. Actually that's not true. Instead, I'm going to check in with a bunch of people at Expo West, so I can find out how the announcement is playing in those bars and restaurants tonight.

And although the focus at the mega-show is on healthy, natural and organic food and drink, those bars are always as packed as the show floor is. They're also the best place to pick up what might eventually become the makings of a good scoop. At least that's what I'm told.

- 'The Insider'

Suggested Reading - Sprouts and Sunflower: The Art of the deal coverage

~The first report (ever) - November 6, 2011: Roll Up Times Two? Sprouts Farmers Market In Talks With Sunflower Farmers Market About Possible Acquisition

~The follow up: A deal is done - February 7, 2012: Deal Announcement From Grocers Sprouts and Sunflower Farmers Market on Tap

~Most Recent: Bringing the elements of the deal together - February 13, 2012: Sunflower Farmers Market, Sprouts and Private Equity: The Art of a Soon to Be Announced Deal

Additionally

~Scoop de jour: Read past columns by 'The Insider', including those where he broke the news about the Sprouts-Henry's deal, here.

~Sunflower makes three: Also see these links - Apollo Management, Sprouts Farmers Market, Sunflower Farmers Market and Henry's Farmers Market - for more reporting, analysis and commentary in Fresh & Easy Buzz on the three farmers market-style chains that are now one.

Deal Announcement From Grocers Sprouts and Sunflower Farmers Market on Tap

The Insider - Heard on the Street

It was in this November 6, 2011 column - Roll Up Times Two? Sprouts Farmers Market In Talks With Sunflower Farmers Market About Possible Acquisition - when I first broke the news that kissing cousin format grocery chains Sprouts Farmers Market and Sunflower Farmers Market were engaged in acquisition-merger deal negotiations, with Sprouts' either acquiring Sunflower Farmers Market outright or Sunflower being merged into Sprouts Farmers Market, with Sprouts' as the controlling entity.

On January 25, 2012 [See - January 25, 2012: Sprouts Farmers Market and Sunflower Farmers Market Ink Acquisition-Merger Deal] I reported that Phoenix, Arizona-based Sprouts, which operates 103 stores - a new store opens tomorrow in Yorba Linda, California - in Arizona, California, Colorado and Texas, and Sunflower Farmers Market, which is headquartered in Colorado and has its operations office in Phoenix Arizona, had reached a deal, pending the ironing out of a few details.

Sunflower Farmers Market, which like Sprouts Farmers Market is privately-held, operates 35 stores in Colorado (12), Arizona (7), New Mexico (6), Nevada (2), Texas (2), Oklahoma (1), Utah (3) and California (2).

Those details have now been resolved, according to my sources, and the two farmers market-style grocery chains are preparing to make an announcement about the acquisition-merger deal.

The announcement should come before the end of this week. However, there are some logistical and related issues that could result in the announcement coming a bit later.

Roll up: Sunflower makes two

It's been less than a year since the acquisition-merger deal between Henry's Farmers Market and Sprouts Farmers Market became final on April 18, 2011.

In January 2011, I broke the news in this column - Will 2011 See Sprouts Farmers Market Acquiring Henry's Farmers Market? 'The Insider' Says it Could Be in The Cards - that Sprouts' and Apollo/Henry's were in acquisition/merger negotiations.

I continued to report extensively on the deal talks throughout January 2011 and into February. [See those reports and columns here and here.]

On Wednesday, February 16, 2011, the two grocers announced the deal. [See: Breaking: Smart & Final Enters Into Agreement to Sell Henry's to Sprouts Farmers Market. The day before, on February 15, 2011, I published this: Sprouts Farmers Market's Acquisition of Henry's to Be Announced This Week, As Early As Wednesday.

Henry's was owned at the time by private equity firm Apollo Global Management (through its Smart & Final food retailing company), which was founded by Leon Black, who remains its chief deal-maker.

Apollo and Sprouts' founders and part-owners merged the Henry's Farmers Market chain into Sprouts Farmers Market, with Henry's going away and Sprouts' in control of the combined chains.

The deal made Apollo Global Management the majority owner of Sprouts Farmers Market.

In addition to Apollo, Sprouts has about 200 investors, most of them individuals. The investors range from a few who hold a considerable amount of stock to others who hold a few shares. Sprouts Farmers Market is not a publicly-held company, however.

Stan and Sean Boney, the chairman and CEO of Sprouts respectively, and board members Scott Wing and Kevin Easler - the four men founded Sprouts Farmers Market in 2002 - have minority ownership stakes in Sprouts Farmers Market, along with the investors. The individual investors were in place before Apollo's involvement.

Doug Sanders is Sprouts' president. He's responsible for the chain's operations, reporting to Sean Boney. Jim Nielson, who was president of Henry's Farmers Market, joined Sprouts Farmers Market last year as part of the merger deal. He is Sprouts' chief operating officer, reporting to Doug Sanders.

Co-founders Stan Boney and CEO Sean Boney, who is Stan's son, had wanted to acquire the Henry's chain, which was founded by Stan Boney's father Henry, for many years.

Stan Boney was the chairman and CEO of the then family-owned Henry's chain until 1999, when it was sold to Wild Oats Markets, which was acquired by Whole Foods Markets in 2007. Three years later he started Sprouts Farmers Market with his son and the two partners/co-founders.

The deal with Apollo Global Management was a good one for Sprouts, not only because it brought Henry's in-house but because it also provides the chain with a constant source of investment capital, private equity firm and majority-owner Apollo, which is also something the Boney's were after to help fuel their growth plans for Sprouts Farmers Market.

Apollo has even more ambitious growth plans for the chain that the founders did, which of course is what private equity firms do - grow a business and then eventually sell it and make a profit.

The deal also took one of Sprouts' two farmers market-style kissing cousin format cousins out as a direct competitor. Instead, the kissing cousin, Henry's, moved into the same house, called Sprouts Farmers Market.

That other kissing cousin competitor is, of course - Sunflower Farmers Market.

And soon it will join its farmers market-style format kissing cousins; all three - Sprouts, Henry's and Sunflower - under the same roof, and the roll up will be completed.

- The Insider

[Readers: Go to these links - Apollo Management, Mike Gilliland, Sprouts Farmers Market, Sprouts-Henry's Deal, Sunflower Farmers Market, The Insider,  Henry's Farmers Market - for an extensive selection of related stories.]

Roll Up Times Two? Sprouts Farmers Market In Talks With Sunflower Farmers Market About Possible Acquisition

The Insider - Heard on the Street

Representatives of Arizona-based Sprouts Farmers Market and Colorado and Arizona-based Sunflower Farmers Market are engaged in discussions about a possible acquisition by Sprouts of Sunflower, which operates 35 farmers market-style grocery stores in eight Western U.S. states, according to my sources.

The talks and negotiations have been going on for slightly over a week, although perhaps longer, according to the information I have.

I stress ... What's going on are discussions of a real and serious nature, but a deal between the two grocery chains has not been reached as of today, according to my sources.

Sprouts and Sunflower operate very similar farmers market-style format grocery stores.

Both privately-held chains focus on offering value-priced natural and organic food, grocery (across all store categories) and related products in their respective stores, which also are about the same size, averaging about 28,000 to 33,000 square feet. Both chains also use fresh produce as a key proposition, building their store formats and product offerings, which are nearly identical, around large produce departments designed to look like an indoor farmers market.

It was just 10 months ago when I first reported (here) that representatives of Arizona-based Sprouts Farmers Markets and then Irvine, California-based Henry's Farmers Markets were engaged in talks involving an acquisition/merger deal between the two farmers market-style grocery chains, which share a common family tree.

In a series of follow-up columns - and in various news stories by Fresh & Easy Buzz published in January and February, we further reported and developed the story, adding new information about the deal talks between private equity firm Apollo Global Management which owned Henry's through its Southern California-based Smart & Final LLC retail company and is now the majority-owner of Sprouts, and Sprouts Farmers Market.

On February 15 of this year Smart & Final announced an agreement to sell Henry's Farmers Market to Sprouts, in a deal that would make the owner of Smart & Final and Henry's the majority-owner of Sprouts.

According to my sources, Apollo Global Management owns slightly more than 50% of Sprouts Farmers Market. The rest of the food and grocery retailing company, which currently operates 106 stores in four Western U.S. states, is owned by members of the Boney family (the founding family of what became Henry's Farmers Market) - Stan Boney is chairman and his son Shon is CEO - who founded Sprouts, two other co-founders, Scott Wing and Kevin Easler who also serve on the board, and nearly 200 investors, ranging from a few who own a good-sized stake in the grocer, to the majority who own small shares. The various investors existed prior to the Henry's Farmers Market deal with Apollo.

In my April 15 column I reported that the deal between the two parties would be final on April 18. [April 15, 2011: Sprouts Farmers Market's Acquisition-Merger of Henry's Farmers Market to Be Final On Monday, April 18.]  Also see: January 24, 2011: 'The Insider' - End-Game Could Be Near in the Sprouts Farmers Market-Henry's Farmers Market Deal Talks.

On April 18, 2001, Sprouts Farmers Market confirmed the deal was final in an announcement. [April 18, 2011: Sprouts Farmers Market Confirms Our April 14 Scoop: Sprouts' Acquisition-Merger of Henry's Farmers Market Final Today.] At that point the mainstream business and grocery industry trade press all wrote stories about the deal, although a couple publications picked up the reporting in Fresh & Easy Buzz prior to the April 18 public announcement by Sprouts and Apollo Global Management.

Sunflower Farmers Market was founded in 2002 by Michael Gilliland and some partners.

Gilliland is the former co-founder and CEO of Wild Oats Markets, Inc., which was acquired in 2007 by Whole Foods Market. Gilliland had left Wild Oats and started Sunflower Farmers Market before the Whole Foods acquisition of Boulder, Colorado-based Wild Oats, which at the time was the Austin, Texas-based chain's main competitor in the the natural-organic food and grocery retailing space.

He served as CEO and was the public and media face of Sunflower Farmers Market until February of this year, when he resigned that position and his seat on the board after being arrested in Phoenix, Arizona and charged with solicitation of a minor prostitute for the purpose of sex.

Gilliland has plead innocent to the charges. He was originally supposed to go to trial in Maricopa County Superior Court (Arizona) on August  9. However, he has requested and received three continuances from the court since then, for trial dates set for September, then October and now November 14, which is his current trial date.

The reason Gilliland and his attorney have given the court for the continuances, according to court documents I've seen, is that the co-founder and former CEO of Sunflower Farmers Market, who still owns shares in the chain, has been traveling out of state. He has a pre-trial conference set for tomorrow (November 7), in advance of his scheduled November 14 trial in Arizona.

Sunflower Farmers Market, which although it maintains its corporate headquarters in Boulder, Colorado where the chain was founded also has an operations-oriented headquarters facility in Phoenix, Arizona where Sprouts is headquartered, hasn't let the controversy surrounding Gilliland's arrest and resignation prevent it from carrying on its operations and rapid growth strategy, which has been in place for a few years.

Immediately following Gilliland's resignation as CEO and from the board on February 10, 2011 - which was two days after his arrest - Sunflower's board began distancing the grocery chain from Gilliland. Two days later on February 12, Sunflower's board, which is headed by Bennett Bartoli, named then-president Chris Sherrell acting CEO. In late April the board made Sherrell permanent CEO of Sunflower Farmers Market.

Along with naming Sherrell as acting CEO on February 12, Bartoli and the board said in a statement that Gilliland would no longer have any involvement with the chain he co-founded and up until his arrest has been the public face of.

The board also said in the announcement that Gilliland and the board said in a statement that Gilliland would no longer have any involvement with the chain he co-founded and up until his arrest has been the public face of. The board also said in the announcement that Gilliland was now a  "minor investor" in Sunflower Farmers Market. All past articles featuring Gilliland - and there were many - posted on the Sunflower Farmers Market website, for example, were removed the day he resigned, as part of disassociating him from the chain and its image.

Since Gilliland's resignation and Sherrel's taking over as CEO in February, Sunflower Farmers Market has launched into two new market regions, opening two stores in Northern California and one unit in metro Tulsa, Oklahoma.

Sunflower opened its first store in Northern California, which was also its first unit in the Golden State, in Roseville near Sacramento on May 11. The second Sunflower market opened last month in Modesto, California. Modesto is in the Northern Central Valley, about 100 miles from Sacramento.

The farmers market-style format grocery chain so far plans to open four additional stores in Northern California next year (in spring and summer) - one unit in Sacramento, two stores in San Jose, and one unit in nearby Mountain View. It's been looking for additional store locations in Northern California as well, with a focus on the San Francisco Bay Area and metro Sacramento regions.

On August 21 Sunflower Farmers Market opened its first store in Oklahoma. That store is in Oklahoma City.

Oklahoma City has recently become ground zero for natural-organic food retailing chains. For example, in July the Natural Grocers' chain opened a store in Oklahoma City. And on October 12 Whole Foods Market opened a store there. The new 35,000 square-foot Whole Foods market is about a mile from the about 28,000 square-foot Sunflower market opened in August.

Sunflower currently has a second store scheduled to open in Oklahoma in early 2012. That unit is in Edmond.

With the addition of stores in California (all currently in and planned for the northern part of the state) and Oklahoma this year, Sunflower Farmers Market now operates 35 stores in eight states in the Western U.S. - Colorado (12), Arizona (7), New Mexico (6), Nevada (2), Texas(2), Oklahoma (1), Utah (3) and California (2).

The grocer also currently has a few planned new stores in the pipeline in its existing market regions. For example, Sunflower announced in late October that its planning a 28,000 square-foot store in the Rimrock Crossing Shopping Center in Grand Junction, Colorado.

Sunflower already has plans to open its thirteenth store in its home state next year. That store, at East Colfax Avenue and Garfield Street in the Denver area, is currently set for a late 2012 opening, CEO Chris Sherrell said in the October press release.

I also know from my sources that in addition to searching for numerous future locations in Northern California, as I've noted, Sunflower also has been looking for more additional store sites in all eight states but most particularly and aggressively in Oklahoma and Utah, along with Northern California.

Until fairly recently Sunflower was focusing on searching for numerous new locations in Texas, where Sprouts has been opening and has added numerous stores with the acquisition of Henry's Sun harvest markets in the state, which were part of the deal this year.  But more recently Sunflower has switched that focus and emphasis to next door Oklahoma.

Sprouts Farmers Market currently has 106 farmers market style grocery stores in four western states - Colorado, Arizona, California and Texas.

Assuming the price was right, An acquisition of Sunflower Farmers Market would be fairly positive from synergistic standpoint  for Sprouts and Apollo, which as I've said in my previous columns earlier this year wants to grow the chain rapidly.

For example, Sprouts has no presence in four of the Western U.S. states where Sunflower has its 35 stores - New Mexico, Utah, Nevada and Oklahoma.

While Sprouts could enter these states fairly rapidly if it wanted to because its decentralized distribution system makes doing so easier than for a self-distributing chain - Sprouts uses a natural-organic foods wholesaler to distribute the majority of products to its stores - an acquisition of Sunflower would obviously make that entry immediate, giving it six stores in New Mexico, three units in Utah, two stores in Nevada and one unit plus more on the way in Oklahoma.

Acquiring such an existing store base makes it easier for a grocer to locate and open additional stores at a faster pace then entering from scratch does.

It also immediately adds sales to the bottom line.

Another plus for Sprouts is that Sunflower has no stores in Southern California, where the majority of its stores now are because of the Henry's acquisition. Therefore, there would be no duplication in Southern California, a key market for Sprouts, with an acquisition of Sunflower Farmers Market, and therefore no need to close any existing stores.

Another plus is Northern California, where both Sunflower and Sprouts are expanding rapidly. Sprouts currently has four stores in the region - one each in El Grove and Roseville near Sacramento, and two in the San Francisco Bay Area, in Sunnyvale (South Bay area) and Dublin, which is in the East Bay Area.

So far Sprouts Farmers Market has two stores set to open in the region next year. Those stores are in Walnut Creek, which isn't far from Dublin in the East Bay Area, and Citrus Heights, which is in the Sacramento metro area, just like El Grove and Roseville are.

Sprouts is also currently in the approval process with the city for a store in Santa Rosa, which is in the North Bay Area. Additionally, the farmers market format grocer is looking for numerous additional store locations in Northern California.

The four stores Sunflower Farmers Market plans to open next year in Northern California are all potentially good fits - and locations - for Sprouts. The two units in San Jose and the one store in Mountain view are near the existing Sprouts market in Sunnyvale, for example, and Sprouts Farmers Market currently doesn't have stores in any of the two cities.

Further, the two stores Sunflower Farmers Market plans to open in Sacramento next year fit into Sprouts' focus on the Sacramento metro region. At present it has no stores set to open in 2012 in Sacramento proper. The two planned Sunflower units would give it two such stores. Citrus Heights, where Sprouts will open a store in early-to-mid-2012, is right next door to Sacramento, and Elk Grove and Roseville, where Sprouts and Sunflower both have existing stores, are nearby.

The Sunflower store in Roseville is far enough geographically from the Sprouts unit that I think Sprouts Farmers Market could probably keep it in operation, were an acquisition to become reality. It could even operate it under the Sunflower name, which might not be a bad idea if it were to keep it open.

Regarding Colorado and Arizona, Sprouts' top two states in terms of store-count along with California - which also are where Sunflower Farmers Market has 19 of its 35 stores (12 in Colorado with 2 more planned, and 7 in Arizona - there is some location duplication but it's actual fairly limited, according to my analysis.

A few Sunflower Farmers Market units in each state may need to be closed. Some of the stores might also be able to be operated under the Sunflower banner, although I think Sprouts would eliminate it like they've done with the Henry's banner. But the minimal duplication is manageable as I see it - and far from a deal stopper.

Earlier this year Sprouts' said the acquisition-merger with Henry's would create a food and grocery retailing company with about $1-$1.2 billion in annual sales. I estimate, adding in new stores opened since the deal was finalized, along with those units planned for the first half of 2012, that Sprouts Farmers Market is on-track to have about $1.5 billion in annual sales soon.

Sunflower Farmers Market has annual sales of about $600-$650 million, based on information I've obtained from sources at the retailer over the last year.

Therefore, were a deal to be done between Sprouts and Sunflower - and I stress the two parties are only talking at this point - I estimate it would make Sprouts Farmers Market a grocery chain with about $2 million in annual sales, which is more than double Sprouts' annual sales before the Henry's deal happened this year.

What I know is that Apollo Global Management has the capital available to do a deal.

I also know it wants to grow Sprouts rapidly. Acquisitions make such rapid growth happen much faster than an organic growth-only approach does.

Sunflower Farmers Market is also in a state of flux, with the resignation of Gilliland, which is something it's managed well. The post-Gilliland Sunflower is open more to change than the chain was while he was still CEO, for example.

It also has investors in the company who when they made the investments a few years ago were then looking at an about five-year time horizon to get some pay back.

Sunflower is also growing rapidly, which takes a lot of cash - new stores, new employees, ect. Some of that growth can come out of cash flow and previous loans and investments. But the rapid new store growth plan Sunflower Farmers Market is following is also going to take new money, in my analysis and opinion.

So, based on what I've laid out above, the stage is set rather well - synergies, cash available, common needs - for an acquisition of Sunflower by Sprouts Farmers Market. But of course, the Devil is always in the details.

Most important, the farmers market style formats are near-identical, as was the case between Henry's and Sprouts. Apollo wouldn't have likely done a roll up of Henry's with Sprouts were the formats not virtually the same.

As such, a second roll up, this time of Sunflower, is the next logical step for Apollo/Sprouts.

It also eliminates the only remaining significant farmers market-style format competitor.

Many operators and investors attach significant value to this element alone when considering a deal. For example, a considerable amount of the motivation behind Whole Foods Market's acquiring Wild Oats in 2007, which was performing poorly but was its leading competitor in terms of directly related formats, was to remove it as a competitor, which is something co-founder and co-CEO John Mackey has stated publicly.

As of today what's going on between the representatives of Sprouts and Sunflower, who all know each other, particularly at the board and senior executive levels, is a real and serious discussion of a possible acquisition of the latter by the former. Executives at neither chain are confirming it, which is wise and as you would expect to be the case.

Stay tuned. I may have more soon.

- 'The Insider'

[Readers: Click here to read all past columns by 'The Insider' about the Sprouts'-Henry's deal. Also, click the following links - Sprouts Farmers Market and Sunflower Farmers Market - for related stories about Sprouts Farmers Market and Sunflower Farmers Market.]

Sprouts Farmers Market Plans to Close Henry's Farmers Market's Corporate Office in Irvine, California July 9

The Insider - Heard on the Street

It's nearly all over in Irvine accept for the sweeping, mopping and locking up.

Sprouts Farmers Market plans to close the Henry's Farmers Market corporate office in Irvine, California July 9, as it completes its consolidation of Henry's headquarters operations into its corporate offices in Phoenix, Arizona, according to my sources.

And since July 9 happens to be a Saturday, there will be time to do some sweeping and mopping up before turning the key in the lock of the Irvine office doors for the very last time.

Sprouts Farmers Market hasn't announced when it plans to close the Henry's Farmers Market's corporate office - just that it will do so at some point. Additionally, a closing date hasn't been reported by any other publication to date, at least based on a search of the three major Internet search engines I did before writing my column.

All the Henry's headquarters employees remaining employed by Sprouts Farmers Market have either moved into their respective jobs at Henry's stores in Southern California or out in the field, or to the grocer's corporate headquarters offices (just a handful of workers) in Phoenix, as the consolidation process that began immediately after Sprouts' and its new majority-owner, private equity firm Apollo Global Management, got the green light from U.S. government regulators on April 18, 2011 that the deal to merge Henry's into Sprouts Farmers Market was approved and final, is nearly completed.

The Henry's corporate headquarters employees not remaining with Sprouts Farmers Market, which include most of the category managers/buyers and other support staff like finance, marketing, administration and human resources, have been laid off, the last remaining batch having completed their tenure in Irvine last week, according to my sources.

The Henry's Farmers Market Stores in Southern California will continue to fly the Henry's banner for most of this year. However, by mid-2012 or earlier all of those units should be re-branded to the Sprouts Farmers Market banner, my sources tell me.

Sprouts has already changed the name of the single Henry's store in Northern California to Sprouts Farmers Market. That store is in Elk Grove, near Sacramento. Sprouts has a store in nearby Roseville. The combining of the two farmers market-style grocery chains, which share a family history, gives Sprouts Farmers Market a little better brand recognition in the Sacramento area, where it will open a third store in Citrus Heights in early 2012 and is looking for numerous other locations.

Phoenix-based Sprouts is starting the re-branding process with Henry's nine Sun Harvest banner stores in Texas. Sean Boney, CEO of Sprouts Farmers Market said in April the Sun Harvest stores should all be flying the Sprouts banner before the end of this year.

The closing of the Henry's Farmers Market headquarters in Irvine will be the end of long era of the chain's being based in Southern California, where it was founded by members of the Boney family, who also are he founders of Sprouts Farmers Market, despite being bought and sold twice over the last couple decades.

For example, Henry's remained headquartered in Southern California through two corporate ownership changes - Wild Oats Markets Inc., which bought the chain from the Boney family - and Commerce, California-based Smart & Final, Inc.

Smart & Final, which is also owned by Apollo Global Management, bought Henry's Farmers Market from Whole Foods Market, Inc. in 2007. Whole Foods Market obtained Henry's in its 2007 acquisition of Wild Oats Markets. The hybrid conventional-natural foods farmers market style chain didn't fit Whole Foods' plans so it sold it to Smart & Final.

Apollo Global Management bought Henry's Farmers Market from Whole Foods Market in 2007 because it wanted a growth vehicle to combine with its Smart & Final chain.

Smart & Final, which operates mostly small-format non-membership warehouse stores, along with some Smart & Final Extra smaller-format style grocery stores, has historically relied on food-service customers - mom and pop grocers, restaurants and the like - for a significant percentage of sales.

However, Apollo's strategy since owning the chain has been to become more of a consumer-focused food and grocery retailer, which led to the start-up of the Extra format stores, the acquisition of Henry's in 2007, and last year's ill-fated launch of five SmartCo Foods stores in metropolitan Denver, Colorado which were closed a few months later. [See - December 11, 2010: Smart & Final's Not So Marvelous SmartCo Foods' Misadventure in Denver and here for details and analysis.]

(Smart & Final's future post Henry's becoming part of Sprouts Farmers Market is the topic of a follow-up column coming soon. Stay tuned.)

Meanwhile Sprouts Farmers Market opened its newest store today. The store is in Dublin, California, which is in the Easy Bay Area, no more than a stone's throw from Safeway Stores' corporate headquarters in Pleasanton.

The Dublin market is Sprouts' third store in Northern California. It also has stores in Sunnyvale (South Bay Area), Roseville and Elk Grove (the former Henry's unit).

It's also one of seven new stores Sprouts Farmers Market plans to open between April and December of this year. In addition to the Dublin store, five of the seven stores are in Southern California, in the following cities: Redondo Beach, Westlake Village, Costa Mesa, Lakewood and Granada Hills. The remaining store is in Carrollton, Texas.

Back in Northern California, which is Sprouts' newest market region and a major focus for the retailer because it plans to open numerous stores in the region over the next few years, the farmers market-style grocery chain is set to begin renovation and expansion in July of a former Co-op grocery store in Walnut Creek(East Bay Area), which it plans to open in early 2012, along with the store in Citrus Height mentioned earlier.

The Walnut Creek store was planned by Henry's prior to the deal. It fit Sprouts' Northern California plan well, so it decided earlier this year to move forward on the location.

- The Insider

Fresh & Easy Buzz's 'The Insider' on the Apollo/Sprouts/Henry's Deal + Related Stories

April 18, 2011: Sprouts Farmers Market Confirms Our April 14 Scoop: Sprouts' Acquisition-Merger of Henry's Farmers Market Final Today

April 14, 2011: Sprouts Farmers Market's Acquisition-Merger of Henry's Farmers Market to Be Final On Monday, April 18

~February 16, 2011: The Sprouts-Henry's Deal: New Website Reunites the Two Grocery Chains As 'One Farmers Market'

~February 16, 2011: Breaking: Smart & Final Enters Into Agreement to Sell Henry's to Sprouts Farmers Market

~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

Also see:

~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

Plus, read more about Sprouts Farmers Market, Henry's Farmers Market, Smart and Final and Apollo Management by clicking on the green links. Use the "older post" and "newer post links at the bottom of each linked page for additional pages/stories.

Sprouts Farmers Market Confirms Our April 14 Scoop: Sprouts' Acquisition-Merger of Henry's Farmers Market Final Today

Last Thursday (April 14) Fresh & Easy Buzz's 'The Insider' columnist broke the news that Phoenix, Arizona-based Sprouts Farmers Market's acquisition of Irvine, California-based Henry's Farmers Market would be final today, Monday, April 18. [Read the column here: Sprouts Farmers Market's Acquisition-Merger of Henry's Farmers Market to Be Final On Monday, April 18.]

Today, Sprouts Farmers Market announced the finalization of the deal that merges the 43-store Henry's Farmers Market chain into Sprouts, creating a 99-store chain - Sprouts Farmers Market - with about $1 billion in annual sales.

There are currently 34 Henry's Farmers Market stores in California and nine Sun Harvest banner units in Texas. Sprouts currently operates 56 stores. The stores are in California, Nevada, Arizona, Colorado, New Mexico, Utah and Texas.

'The Insider' also broke the news in his January 5, 2011 column that the owner of Henry's Farmers Market, private equity firm Apollo Global Management, and representatives of Sprouts Farmers Market were in serious negotiations about an acquisition-merger of the Henry's chain by Sprouts.

On February 16, 2011 Sprouts Farmers Market and Apollo Global Management announced that a deal had been done, and that it would be finalized in the second quarter of this year.

Under the deal worked out between Apollo Global Management and Sprouts Farmers Market, which is final today, Henry's Farmers Market will be merged into and become part of Sprouts; a single chain. The combined operations Will be run by Sprouts Farmers Markets out of its corporate headquarters in Phoenix. The Henry's and Sun Harvest banner stores will eventually be changed to the Sprouts Farmers Market name. [Read the February 16 announcement here.]

Additionally, under the deal, Apollo Global Management will become the majority owner of Sprouts Farmers Market. The current owners of Sprouts, which include two of the four founders of the chain, chairman of the board Stan Boney and his son, CEO Shon Boney, will hold a minority ownership interest in the farmers market-style food and grocery retailer.

Sprouts Farmers Market announced the finalization of the Henry's deal, which Fresh & Easy Buzz reported five days ago would happen today, in a variety of ways today, including posting a statement [here] on its Sprouts-Henry's 1farmersmarket.com website, as well as on its Facebook page and various Twitter feeds.

Sprouts also announced today's finalization of the deal via a letter from the chain's president, Doug Sanders. In the letter, which is similar to the statement on the 1farmersmarket.com website linked above, Sanders said about merging Henry's into Sprouts Farmers Market: "As similar as our companies always have been, it will take time, patience and great diligence to merge them into one." We will be "carefully analyzing best practices and products [of both Sprouts and Henry's] to become more than just the sum of our parts," he added.

Sanders also said about the combined chains' that new products will start appearing on store shelves - most specifically will be the introduction of the Sprouts Farmers Market private brand onto the shelves of the Henry's and Sun Harvest stores in California and Texas - over the next few weeks. He also said new programs will be introduced in late spring-to-early summer. Shoppers will also see employees sporting new uniforms in the stores starting in September, according to Sanders.

It will be a number of months before the Henry's and Sun Harvest banner stores are changed to the Sprouts Farmers Market name. Sprouts plans  first to change the name of the Sun Harvest markets in Texas, followed by doing the same with the Henry's stores in California.

Sprouts plans to open at least seven additional new stores this year, including at least six units in California, in the following cities: Redondo Beach, Westlake Village, Dublin, Costa Mesa, Lakewood and Granada Hills, along with a store in Carrollton, Texas. A planned new Sprouts market in Citrus Heights, California, which is near Sacramento, could also be opened at the end of this year. But more-likely the store will be opened in early 2012, according to our sources.

Henry's had a number of new stores planned prior to the merger talks and deal, mostly in Southern and Northern California. Sprouts has been evaluating those planned locations, and according to our sources, will open those Henry's stores in the pipeline that don't duplicate new locations Sprouts Farmers Market currently has in the pipeline.

For example, pre-deal, Henry's, like Sprouts, was putting a major focus on obtaining locations in Northern, California, where there are currently two Sprouts banner stores, in Sunnyvale and Roseville, and one Henry's unit, in Elk Grove. Roseville and Elk Grove are near Sacramento. Sunnyvale is near San Jose, in the Bay Area.

A Henry's store is planned for Walnut Creek, which is in the east Bay Area. Sprouts plans to go forward and open the Walnut Creek store in 2012.

One the other hand, Henry's was looking at locations in Roseville, where Sprouts opened its store April 6. Our sources say a second (the pre-merger potential Henry's) unit in Roseville is unlikely so soon to opening the first store in the city.

'The Insider,' who since January 5 has been on this story like a private equity firm executive in search of a big-bonus IPO, will have more on the "new Sprouts Farmers Market" later this week. Stay tuned.

[Readers: You can follow the Sprouts-Henry's acquisition-merger story in Fresh & Easy Buzz from January 5, 2011, when we first broke the news that serious talks were taking place between the two parties, to last Thursday (there's much in-between those dates), when our 'The Insider' columnist correctly reported the acquisition-merger would become final today at the following links - The Insider, Sprouts Farmers Market, Apollo Management, Henry's Farmers Market, Smart and Final, Sprouts-Henry's Deal, Sprouts.]

Sprouts Farmers Market's Acquisition-Merger of Henry's Farmers Market to Be Final On Monday, April 18

 

The Insider - Heard on the Street

As regular readers of Fresh & Easy Buzz know, I broke the news in my January 5, 2011 column that private equity firm Apollo Global Management, owner of grocery chains Smart & Final and Henry's Farmers Market, both based in Southern California, and Phoenix, Arizona-based Sprouts Farmers Market were in serious deal talks about an acquisition (or merger) of the Henry's chain by Sprouts.

I also reported on the positive progression of the deal talks in a series of columns beginning after January 5, leading up to to the February 16, 2011 announcement by Apollo and Sprouts Farmers Market that a deal had been done, in which Sprouts would acquire Henry's Farmers Market, and that as part of the deal the investment firm would become majority owner of the Sprouts chain, in partnership with its current group of co-founders and co-owners, which include CEO and board member Shon Boney and his father Stan, who's chairman of the board.

Shon Boney's father and his uncle, Scott Boney, founded the chain that eventually became Henry's Farmers Market, naming it after their farther, Henry Boney, who started the first family market, a fruit stand in San Diego, in 1943.

Scott Wing and Kevin Easler co-founded Sprouts Farmers Market with Stan and Shon Boney. Like the Boney's, the two men hold minority ownership stakes in the company and serve on the board, as do Sprouts' president, Doug Sanders, and chief financial officer Brad Denton. One or more representatives of private equity firm Apollo Global Management will join the current six-person Sprouts Farmers Market board after the Henry's Farmers Market acquisition-merger is final on Monday.

This morning I can report the acquisition-merger of Henry's Farmers Market by Sprouts Farmers Market and Apollo Global Management will become final on Monday, April 18, unless there's a major hiccup between today and Monday, which is unlikely. If such a hiccup were to occur, which is doubtful, the finalization of the Henry's-Sprouts merger will still happen before the end of next week, my sources tell me.

The finalization of the deal, announced on February 16, will allow Sprouts Farmers Market to begin consolidating and integrating the Henry's operation, which is headquartered in Irvine, California, and the 40-plus Henry's banner (in California) and Sun Harvest banner (Texas) stores into its operations.

Sprouts plans to first change the Sun Harvest banner stores in Texas to the Sprouts Farmers Market name. Later is plans to re-brand the Henry's Farmers Market banner stores to Sprouts Farmers Market. All new Henry's and Sun Harvest banner stores in the pipeline will be opened under the Sprouts banner.

Even though Apollo Global Management will continue to be the majority-owner of City of Commerce California-based Smart & Final, as well as becoming the majority-owner of Sprouts Farmers Market, the two grocery chains will not have anything to do with one another from an operations standpoint. The two chains are separate corporate entities but do share the same parent - private equity firm Apollo Global Management.

Speaking of that shared parent, here's a prediction: Look for Apollo Global Management to take Sprouts Farmers Market public in an IPO about 12 -to- 24 months from Monday, April 18.

According to my sources, Sprouts Farmers Market will keep the Henry's Farmers Market headquarters office in Irvine, California operating no longer than six -to- 12 weeks after the deal closes on Monday, as it transitions the Henry's corporate functions to its Arizona corporate office.

The majority of the Henry's Farmers Market headquarters employees will lose their jobs because the buying, merchandising, marketing, finance, human resources and other corporate functions will be picked-up by existing Sprouts Farmers Market headquarters' employees in Phoenix, as is almost always the case in such acquisitions and mergers. It's a way to immediately reduce staff-level labor costs.

Sprouts recently signed a 32,306 square foot lease renewal and expansion of its corporate offices at the Paradise Village Office Park, which is at 11811 North Tatum Boulevard in Phoenix, in preparation of the closing of the deal on Monday, according to the joint-venture owners of the property, Sterling American Property Inc. and Phoenix-based Lincoln Property Company, who's brokers published the lease signing on April 7. Lincoln Property Company manages the 268,598 Paradise Village Office Park complex in Phoenix.

Most of the Henry's headquarters employees already know their fate and when they're leaving the company. Those few who don't know will learn more next week.

So far only a couple of the headquarters' employees have been offered jobs by Sprouts Farmers Market at its Arizona offices. My sources tell me just two of the members of the Henry's Farmers Market corporate team, president Jim Nielsen and a merchandising-schematics staffer, have been offered and excepted positions at Sprouts in Arizona. Nielsen will become Sprouts chief operating officer once the acquisition-merger is final on Monday. He announced his position in a letter posted on the Henry's Farmers Market website in March, 2011.

A handful of other Irvine headquarters office employees have been offered field merchandising and store-level positions at some of the existing Henry' stores in Southern California that will eventually fly the Sprouts Farmers Market banner.

Integrating Henry's Farmers Market's corporate functions and operations into Sprouts' Phoenix, Arizona headquarters should be fairly seamless because as noted above Jim Nielsen is joining Sprouts Farmers Market as its chief operating officer. Nielsen previously held the chief operating officer title at Henry's Farmers Market, before being promoted not too long ago to president.

None of the Henry's and Sun Harvest store employees are being let go at this point in time specifically due to he merger. It's likely that will only happen if and when Sprouts closes any of the existing 40-plus Henry's and Sun Harvest stores. And if it does close any of the stores, and if so it won't be many units, Sprouts will likely offer employees jobs at existing or new stores that come on line, my sources say.

When the deal closes on Monday, the combined Sprouts and Henry's - then called Sprouts Farmers Market - will operate 99 farmers market-style food and grocery stores in California, Nevada, Arizona, New Mexico, Colorado and Texas.

Sprouts opened it's newest store in Roseville, California, which is near Sacramento in Northern California, on April 6. Sprouts Farmers Market will open at least seven additional new stores this year, including units in Redondo Beach, Westlake Village, Dublin, Costa Mesa, Lakewood and Granada Hills (all  in California), and Carrollton, in Texas, according to Sprouts Farmers Market's CEO, Shon Boney. Another new store in Citrus Heights, California, near Sacramento, could also be opened at the end of this year, or in early 2012.

I'll  have more on the new Sprouts Farmers Market - which will have annual sales of about $1 billion and over 100 stores, in the 20,000 -to- 32,000 square-foot range, making it a major player in the Western U.S. - in a follow-up column soon.

- The Insider

[Editor's Note: Read 'The Insider's' columns on the Henry's-Sprouts Farmers Market deal, along with our additional coverage, at the links below.]

~February 16, 2011: The Sprouts-Henry's Deal: New Website Reunites the Two Grocery Chains As 'One Farmers Market'

~February 16, 2011: Breaking: Smart & Final Enters Into Agreement to Sell Henry's to Sprouts Farmers Market

~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

Also see:

~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

Plus, read more about Sprouts Farmers Market, Henry's Farmers Market, Smart and Final and Apollo Management by clicking on the green links. Use the "older post" and "newer post links at the bottom of each linked page for additional pages/stories.

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 Sprouts Farmers Market, Henry's Farmers Market, Smart and Final and Apollo Management 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.

Sprouts Farmers Market's Acquisition of Henry's to Be Announced This Week, As Early As Wednesday

The Insider - Heard on the Street

The end-game is near

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.

The announcement is likely to come tomorrow, Wednesday, February 16, but if not no later than the end of this week, according to my sources.

Henry's Farmers Market, which has 46 stores in California and Texas (36 Henry's banner units in California and 10 Sun Harvest banner markets in Texas), is part of City of Commerce, California-based Smart & Final. Smart & Final, and thus Henry's, is owned by private equity firm Apollo Global Management.

Sprouts Farmers Market is privately held. It has 55 stores in Arizona, Colorado, California and Texas.

The two chains operate stores with nearly identical farmers' market-style formats and stores, featuring mostly natural and organic perishable and packaged food and grocery products, with an emphasis on fresh produce. Both chain's stores, which average 20,000 -to- 30,000 square-feet, also offer fresh meats, fresh-prepared foods, non-foods, nutritional supplements and more.

Henry's was founded in Southern California by the late Henry Boney. Members of Boney's family are the founders and principle owners of Sprouts Farmers Market. [See the stories linked at the end of this column for details about both chains.]

Related to the planned announcement, I also learned earlier today, from a source in a very good position to know, that a representative for Sprouts Farmers Market was "urgently" looking for a nice hotel or resort in Scottsdale, Arizona (next door to Phoenix) with a space or room suitable for a high-profile announcement and media interview.

I broke the story on the Sprouts-Henry's deal talks in my January 5, 2011 column, which spokespersons for both chains have since confirmed in Fresh & Easy Buzz and to a couple other publications, and have reported that the talks have been continuing between the two parties since then, in a series of columns. [ See the links at the bottom of this column.]

My sources say an acquisition deal has now been done.

The announcement should come tomorrow. But if not tomorrow, no later than the end of this week.

Stay tuned.

[Editor's Note: 'The Insider' column appears regularly in Fresh & Easy Buzz. The opinions in the columns are those of 'The Insider,' and not necessarily shared by Fresh & Easy Buzz.]

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 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

The UFCW Union Becomes A Player in the Sprouts-Henry's Acquisition Talks...As the Two Chains Move Closer to A Deal

The Insider - Heard on the Street

A new, outside element - the United Food and Commercial Workers (UFCW) union - has injected itself not directly but significantly into the discussions between representatives of Irvine, California-based Henry's Farmers Market and Phoenix, Arizona-based Sprouts Farmers Market regarding an acquisition of the Henry's food and grocery chain by Sprouts.

And in response, Jim Nielsen, president of Henry's Farmers Market, has sent a letter about the union's actions (via e-mail) to all of Henry's employees, along with having a copy of his letter posted in the break rooms at each of the Henry's Farmers Market banner stores in California and Sun Harvest banner markets in Texas. Henry's Farmers Market is owned by City of Commerce-based Smart & Final, which in-turn is owned by private equity firm Apollo Global Management. Sprouts Farmers Market is privately-held.

Below is the full scoop. But first a little background and recent history.

UFCW union's Henry's wage recover program

In August-September 2010, the UFCW union's Grocery Workers United Wage Recovery Program in Ontario (Southern) California launched a campaign, which it says was in response to requests by several Henry's Farmers Market store-level employees, to recover what the retail grocery workers' union says are back wages owed to some of the chain's employees, due to a variety of reasons.

In August and again in September 2010, the union's wage recovery program sent letters to Henry's workers, asking for information regarding various aspects of their employment at the farmers market-style grocery chain, which is non-union.

Additionally, the UFCW set up a website, "Where is My Money Henry's" (here), where it details the wage claim issues and charges regarding Henry's Farmers Market and some of its past and current employees. You can also see the August and September 2010 letters and related information at the website. The site also has a video in which people identified as employees of Henry's Farmers Market talk about the issue.

Recently the union launched a second website, HenryMarkets.Net, which it's also using in the wage recovery program. It's also set up a twitter feed and a Facebook page as part of the program.

The January 28 letter

On January 28, 2011, the union's wage recovery program sent this letter to employees of Henry's Farmers Market. The letter addresses the current acquisition/merger discussions going on - and yes, the talks are continuing - between representatives of Henry's and Sprouts, the news of which I broke in my January 5, 2011 column -

Along with the letter is this direct mail piece, "We've Been Told...You'll Be Sold," directed to Henry's employees from the UFCW. The headline of the piece: "We've heard (Apollo) Henry's is trying to peddle your store to Sprouts from Phoenix, Arizona. You think Henry's (Apollo) was a Bad Dream...Sprouts will be a Nightmare."

The snail mail piece then asks the Henry's Farmers Market employees to fill-out and mail the attached card back to the union if it wants the UFCW to represent the workers in contract and wage negotiations with Henry's senior management.

Henry's response

Yesterday (Thursday, February 3) Henry's Farmers Market's president, Jim Nielsen, sent a letter to all the employees of the Smart & Final/Apollo-owned grocery chain, updating the workers on the acquisition talks with Sprouts Farmers Market, along with addressing the letter sent them by the UFCW's wage recovery program, which the Henry's employees received in their home mailboxes over the last couple days.

The letter only briefly mentions the acquisition talks, explaining to the Henry's employees that the representatives of Henry's Farmers Market and Sprouts Farmers Market are continuing the discussions, but that there is "no completed transaction" yet.

The rest of Nielsen's letter, over half the text, focuses on the letter sent Henry's employees by the union's wage recovery program. In his letter, Jim Nielson says the UFCW union is trying to drive a wedge between Henry's team members and the chain's management, using the acquisition discussions with Sprouts as a tactic to do so.

Nielsen hasn't said much if anything to Henry's Farmers Market employees or others about the union's wage recovery program since it was launched in August-September 2010 - until now, in his letter yesterday to employees of the food and grocery chain.

And the January 2011 letter and direct mail piece to the Henry's employees from the UFCW union's wage recovery program is the first piece we're aware of that the union has sent to Henry's workers since its September 2010 letter and direct mail package.

The title of my January 30, 2011 column - The Sprouts & Henry's Deal Talks: Smart & Final is Looking Like A Retailer That Wants to Make A Deal - helps explain the concern by Henry's president Nielsen over the latest efforts by the UFCW union, in which it's using the acquisition talks with Sprouts Farmers Market as its angle in the direct mail appeal to employees of the chain. The key reason for that concern: The ownership of Henry's Farmers Market very much wants a deal with Sprouts.

And I can report that although a deal, or as Henry's president Jim Nielsen writes in his letter to employees, "no completed transaction," has yet been inked by the two parties, the discussions and negotiations progressed this week, and the probability that an acquisition, or some form of hybrid merger, between Sprouts Farmers Market and Henry's Farmers Market is much more likely today than it's been since I first reported on the deal talks in my January 5, 2011 column. Of course, the Devil is always in the details.

Stay tuned.

- 'The Insider'

[Editor's Note: 'The Insider' column appears regularly in Fresh & Easy Buzz. The opinions in the columns are those of 'The Insider,' and not necessarily shared by Fresh & Easy Buzz.]

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

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