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

The Sprouts & Henry's Deal Talks: Smart & Final is Looking Like A Retailer That Wants to Make A Deal

The Insider - Heard on the Street

It's been over three weeks since I broke the story that representatives of Phoenix, Arizona-based Sprouts Farmers Market and City of Commerce, California-based Smart & Final were having discussions about a possible acquisition of Irvine, California-based Henry's Farmers Market by Sprouts. See my January 5, 2011 column: Will 2011 See Sprouts Farmers Market Acquiring Henry's Farmers Market? 'The Insider' Says it Could Be in The Cards

Smart & Final, which is owned by private equity firm Apollo Global Management, owns Henry's Farmers Market. Sprouts Farmers Market is privately-held.

The 25 days hence doesn't mean the discussions have ended though. To the contrary, talks between the Sprouts Farmers Market and Apollo Global Management/Smart & Final representatives are set to continue.

But even more interesting, I can tell you this: Smart & Final and its private equity firm owner want to sell the Henry's Farmers Market chain, even if a deal with Sprouts doesn't come to fruition. This strong desire to sell Henry's is also a key reason why the acquisition/merger talks are continuing.

Sprouts Farmers Market is the closest bird-in-the-hand buyer Smart & Final has. But if the bird (Sprouts) decides not to build its nest in the hand (Henry's), It's my analysis Smart & Final will shop Henry's Farmers Market around, searching for another buyer.

Why? Because Smart & Final wants and needs to unload Henry's in order to get an infusion of needed cash, after losing what Fresh & Easy Buzz reported in November and December 2010 to be at least $40-$50 million, on its SmartCo Foods venture in Denver. [See - December 11, 2010: Smart & Final's Not So Marvelous SmartCo Foods' Misadventure in Denver; November 17, 2010Smart & Final Pulls the Plug On All Five SmartCo Foods Stores in Metro Denver After Being Open Less Than Five Months

Some recent behavior by Smart & Final/Henry's lends a bit of observational or empirical evidence to what my sources tell me and what I offer in my analysis above.

First, in my January 5 column I reported Smart & Final/Henry's pulled out of signing a lease for a store in Boise Idaho, which would have been its first in the state, at the last minute, in late December 2010, surprising the building's owner, as well as members of the Boise City Council. Smart & Final/Henry's was high on locating the store at the site in Boise, until the plug was pulled on SmartCo Foods in November 2010.

Most recently, Smart & Final/Henry's decided against signing a deal it had in principal with John DiNapoli and his JP DiNapoli Cos. Inc. commercial real estate company, which earlier this month bought Cosentino's Market, at 2666 South Bascom Avenue in San Jose, California, and land around the store from the Cosentino brothers, for $10 million. Members of the Cosentino family have operated grocery stores in the San Francisco Bay Area for over eight decades, along with acquiring real estate, like the land they owned around the South Bascom store. [Read - January 17, 2011
First Look at the Willow Glen-San Jose Fresh & Easy Neighborhood Market Store Set to Open March 2, 2011 - for more details about the Cosentino's.]

Developer DiNapoli's plan called for demolishing the existing Cosentino's store building and then constructing a new building on the same site, which would house a Henry's Farmers Market store. The Henry's store would serve as the food and grocery retail anchor of what would then become a shopping center developed by DiNapoli on the surrounding land he bought from the Cosentino's along with the market. The target was to have the Henry's and some related stores opened in 2012.

But the developer and owner of the properties has found a new, local grocer to go into the Cosentino's store and to serve as the food and grocery retail anchor for his development. The local grocer is Lunardi's Markets, which like Cosentino's has a long history (57-years) in San Francisco Bay Area food retailing. The founders of both Cosentino's and Lunardi's were immigrants from Italy.

Instead of tearing down the building, Lunardi's is going to move into it - and soon. Cosentino's is closing on February 26, 2011. According the the developer, Lunardi's plans to move in just a few days to a week after the Cosentino brothers close the store.

Lunardi's Markets, which is headquartered in San Bruno just a few miles down the peninsula from San Francisco, operates seven supermarkets in the Bay Area. The soon to be vacated Cosentino's supermarket at Union & Bascom in San Jose will become store number eight for the family-owned, independent grocer. Lunardi's has an existing store at 4650 Meridiam (at Branham) in San Jose, not far from the 2666 South Bascom Cosentino's store.

The reason this decision by Smart & Final/Henry's to not go forward with the store is significant is because prior to November 2010, when Apollo Global Management/Smart & Final pulled the plug on its less than five month old SmartCo Foods venture in metro Denver, Colorado, Henry's was going full-bore into grabbing store locations in Northern California, focusing on the Sacramento region and the Bay area. Henry's Farmers Market opened its first store in Elk Grove, near Sacramento, in the summer of 2010.

However, Smart & Final/Henry's has now put the breaks on all that activity; so much so that it's obvious to a close observer that the behavior is related to the acquisition talks with Sprouts Farmers Market.

For example, in addition to the above examples, Smart & Final/Henry's recently put the breaks on its plans to open a store in Walnut Creek, California, in the East Bay Area. Just a few months ago the retailer was attempting to fast-track the approval of the store through the Walnut Creek City Council. Now, according to a source with the City of Walnut Creek, little has been heard recently about Henry's plans to open the store in the city.

Further in this regard, commercial real estate sources who previously provided us with information about the various cities and neighborhoods in Northern California where Henry's was looking at and signing leases for stores in Northern California, told me recently the grocer's search has for all practical purposes been put on hold. This tracks with similar information I have from a source in a position to know the day-to-day plans at Henry's in terms of its new store location search strategies.

Lastly, the grocer recently took down a list of coming new stores from the Henry's Farmers Market website. Looking at this behavior in conjunction with what I've described above helps make my point, which is that all is at hold at Henry's because Apollo Global Management/Smart & Final have one thing in mind - selling the chain.

My bottom line: The talks between representatives of both farmers market-style food-grocery chains continue. But if a deal can't be done to sell Henry's Farmers Market to Sprouts Farmers Market, or to merge the two chains in a way that puts at least a substantial amount of cash in Smart & Final's hands, Apollo Global Management/Smart & Final will shop Henry's around, hoping it can find a buyer. Is there another buyer. That's hard to say. But I can say without a doubt I don't see another buyer out their that has the same high level of synergies with Henry's Farmers Market that Sprouts does.

Therefore, the talks between Sprouts and Smart & Final/Henry's continue. Or to quote that famous deal-maker of the baseball diamond, Yogi Berra: " It ain't over till it's over." And it isn't over between Sprouts and Henry's - yet.

- '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. Below are links to 'The Insider's' first column of 2011, and to a selection of 2010 columns, published in Fresh & Easy Buzz.]

The Sprouts and 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

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

End-Game Could Be Near in the Sprouts Farmers Market-Henry's Farmers Market Deal Talks

The Insider - Heard on the Street

It's been three weeks since I first broke the story in my January 5, 2011 column that talks were going on between Sprouts Farmers Market and Smart & Final regarding a possible acquisition of Smart & Final-owned Henry's Farmers Market by Sprouts. City of Commerce, California-based Smart & Final, and thus Henry's, is owned by private equity firm Apollo Global Management. Arizona-based Sprouts Farmers Market is privately-held.

Since my January 5 column and follow-up columns, along with this news story - January 8, 2011: Smart & Final-Henry's Tell Employees About Deal Discussions With Sprouts Farmers Market; Confirming 'The Insider's' Reports - a couple other publications have followed our lead and written about the Sprouts/Henry's deal talks, including Supermarket News, which published a story on January 13, 2011 here. The January 8 story linked above offered a clear road map as to how other publications could easily check the deal talk reports published in Fresh & Easy Buzz.

The deal talks

No deal has yet been reached by the two parties. The talks continue though. And, based on information from my sources, I can tell you that both Sprouts and Apollo/Smart & Final want to make a deal that would result in an acquisition of Henry's Farmers Market by Sprouts Farmers Market. But as they say - the devil is in the details. Think details like valuations and financing, for example.

Regarding those details, sources tell me the two parties are very close to finding an agreement on them. Apollo/Smart & Final and Sprouts' ownership team have talked before about a possible acquisition of Henry's Farmers Market by Sprouts Farmers Market. But, my sources say, the representatives of both chains are currently closer to doing a deal than they've been in any of those past discussions.

One source tells me he thought a deal might be announced by the end of last week. It wasn't. But talks are continuing this week.

I'm not going to predict an outcome just yet. But based on what I've been hearing since late last week, don't be surprised if some sort of a deal is announced before this week is out.

I will be offering more on the deal talks before the week is out though. So 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. Below are links to 'The Insider's' first column of 2011, and to a selection of 2010 columns, published in Fresh & Easy Buzz.]

The Sprouts and 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

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

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

The photograph pictured above, "A New York State of Mind," is by Mandy Wiltz. Click here to learn more about the photo and photographer-artist Mandy Wilz.

The Insider - Heard on The Street

"Some folks like to get away,
Take a holiday from the neighborhood.
Hop a flight to Miami Beach or to Hollywood.
But I'm takin' a Greyhound on the Hudson River line.
I'm in a New York state of mind.

I've seen all the movie stars in their fancy cars and their limousines.
Been high in the Rockys under the evergreens.
I know what I'm needin', and I don't wanna waste more time.
I'm in a New York state of mind.

It was so easy livin' day by day
Out of touch with the rhythym and blues
But now I need a little give and take
The New York Times, the Daily News

It comes down to reality, and it's fine with me cause I've let it slide.
I don't care if it's Chinatown or on Riverside. I don't have any reasons.
I left them all behind.
I'm in a New York state of mind..."

-'New York State of Mind.' Billy Joel
[The full lyrics are here. Listen to the song here.]

A 'New York State of Mind' - Walmart in the 'Big Apple'

As a student and analyst of Walmart Stores, Inc., particularly as it pertains to food and grocery retailing, 'The Insider' picked a good day to be in New York City - although I'm glad to be headed out since I didn't bring my extra-heavy jacket and another mega-blizzard is on the way.

The 'Big Apple' of American cities in the Empire State is buzzing today over the 'Big Apple' of the retail world's plans to open stores, ranging from large to small, in New York City. A good newspaper headline about the issue, which is one I've yet to see is: 'Gotham retailer invades Gotham City.'

Here's the scoop: Walmart has launched a new website [here] dedicated to promoting its plans to open stores in New York City, along with gaining support for those plans from residents of the 'Big Apple.'

The website includes an online petition, which the retailer is asking New Yorkers to sign, as a way to show their support for Walmart stores in the city.

The website, along with much activity on Walmart's Facebook page and Twitter feeds, is part of an aggressive multi-platform advertising and public/community relations campaign the Bentonville, Arkansas-based 'Big Apple' of U.S. and global retailers is launching to win support for its proposal to open numerous stores of various sizes in a number of the New York City's boroughs.

Walmart has also decided skip tomorrow night's New York City Council meeting, where the retailer's plans to open stores in the city, along with the potential impacts of those plans, will be discussed.

Walmart Stores, Inc. has in principle the support of New York City Mayor Michael Bloomberg, who has said the retailer will bring new jobs and affordable goods to the city.

But the mega-retailer has angered New York City Council Speaker Christine C. Quinn, who's quoted (italics) in a story by the New York Times regarding the Walmart's decision to skip tomorrow's council meeting as saying: "If you’re [Walmart] proud of who you are, if you’re proud of your product, if you think you’re the best thing since sliced bread, why wouldn't you come and tout it? They’re not showing up because they don’t have the stuff they say they have. They don’t have the data to refute what myself and others are saying."

Speaker Quinn, the leader of the council, wasn't a supporter of Walmart's New York City plans prior to its decision to skip tomorrow's hearing.

One thing is for sure, the Walmart in New York City issue is just getting started. The city's newspapers, television stations and radio stations are filled with reports on the topic. Just a few examples include reports in: The Daily News, The Brooklyn Eagle, New York Times, Crain's NY, The Village Voice, Brooklyn Paper, The Gothamist and DNAinfo. Television stations such as WNYC and NY1 reports, along with others, also did reports on Walmart in New York City today, as did CNN and Fox News, which means the story is becoming national since they are the two leading national cable news outlets.

Organized labor and its allies on the New York City Council, along with a coalition of small business people, including independent and mom and pop grocers plus others, are leading the charge against Walmart's being granted city approval to open stores in the 'Big Apple.'

Walmart says it's bought ad spots from at least a dozen New York City radio stations and over 30 newspapers, including a number of the media outlets linked above that are reporting on the story, in order to help it tell its story in a media blitz over the next couple weeks.

"What should be clear, especially in this week's activities, is that we are not going to be idle while others try to tell our story for us, and build that story on misinformation, Walmart spokesman Steven Restivo said in a statement. "We know we have a good story to tell. And quite frankly, we owe it to New Yorkers to be proactive in telling it."

The debate and fireworks have started on what's going to be the most challenging of the three urban store initiatives Walmart Stores has announced so far.

The retailer has had a success in Chicago, where it launched its first urban store initiative last year, winning support from Chicago Mayor Richard Daley, and even getting an agreement from the United Food & Commercial Workers (UFCW) that it wouldn't fight to keep Walmart out of the city, in return for its agreeing to offer hourly wages in the urban stores at rates above what it normally pays.

Walmart's second urban store initiative and campaign, which it launched late last year in Washington D.C., also looks positive for the retailer in terms of its gaining approval for a number of stores in the district.

There is some opposition to the retailer's plans and proposals. But it doesn't even register on the retailer Richter Scale compared to the uphill battle Walmart Stores, Inc. faces in New York City. But then, among other reasons - that's why its called the 'Big Apple.' Everything is bigger in New York City, including battles over mega chain retailers opening stores in the city.

A 'New York State of Mind' - Apollo Global Management

While the buzz in New York City's boroughs is focused on Walmart, the investment bankers and traders on Wall Street are talking turkey today about the possible buyout of Sara Lee Corp., by a consortium of private equity firms led by Apollo Global Management and its founder and chief deal-maker Leon Black.

The deal would be huge: A current consensus of Wall Street analysts put the value of a buyout of Sara Lee Corp. as of today at about $12.6 billion, or around $19.33 a share. Sara Lee Corp. stock closed at $18.01 a share today.

Downers Grove, Illinois-based Sara Lee, which is a global company, is best known for its food and drink brands, which comprise the company's number one and two largest business units. Sara Lee's largest and most profitable business unit is its international beverages segment, which focuses on coffee and tea brands like Senseo, Douwe Egberts and Pickwick, which are top-sellers in Europe, Australia, and Brazil.

The company's second largest business unit includes the popular U.S. meat brands Ball Park (hot dogs and sausages), Hillshire Farm (lunch meat) and Jimmy Dean (sausages and more), as well as the Sara Lee frozen desserts brand.

The private equity firm consortium being led by Apollo Global Management could also make an offer for one or more parts, such as the drinks' and food business units, of Sara Lee rather than the whole company. Or they could acquire all of Sara Lee and then sell off some of its parts. For example, it's being reported today by a number of financial publications that Brazilian meat processing company JBS is part of the Apollo-led group. If so, I smell an interest in Ball Park franks, Hillshire Farms' lunch meat and Jimmy Dean sausage, all meat brands owned by Sara Lee Corp. (You can see a list of all of Sara Lee's brands here.)

Sara Lee's board is in the process of deciding if it wants to sell the whole company or continue selling off some of its parts, which it's started to do: Its selling the North American bread and bakery unit to Mexico's Grupo Bimbo for $925 million, in a deal that's expected to close by the end of the first quarter of 2011.

Yesterday, Apollo Global Management, which owns City of Commerce, California-based food and grocery retail company Smart & Final and its Henry's Farmers Market chain, reported that its profit for the three month fiscal period that ended in September 2010 rose over the same fiscal quarter a year earlier, as the value of investments in the firm's $14.7 billion Fund VII increased.

Economic net income, which is the key metric private equity firms generally report and that Wall Street analysts follow regarding the firms' performance, for the three months ending in September rose to $315.3 million, up from $173.3 million for the same period a year earlier, Apollo said in a statement.

Additionally, economic net income from private equity was $213.7 million, up from $71.8 million a year earlier, which Apollo said in the statement was partly attributable to an increase in the value of its portfolio investments in fund VII, a $14.7 billion fund that it finished raising in December 2008.

Private equity firms create various funds like Apollo's Fund VII, then put a pool of investors together to fund it. Monies from the funds are then used for various corporate acquisitions, buyouts and investments.

Apollo, which isn't publicly traded, doesn't normally report quarterly income figures. But the private equity firm plans a public offering soon. Therefore, its been periodically reporting its financial information to the U.S. securities and exchange commission in anticipation of the filing, and being listed on the New York Stock Exchange.

Apollo and the Sprouts & Henry's deal talks

Readers might recognize the name Apollo Global Management from my two most recent columns about the talks between Apollo-owned Smart & Final/Henry's Farmers Market and Sprouts Farmers Market - January 7, 2011: Sprouts Farmers Market-Henry's Farmers Market Deal Negotiations Continue; End-Game Could Be Near and January 5, 2011: Will 2011 See Sprouts Farmers Market Acquiring Henry's Farmers Market? 'The Insider' Says it Could Be in The Cards - along with a having read a January 8, 2011 news and analysis story in Fresh & Easy Buzz [Smart & Final-Henry's Tell Employees About Deal Discussions With Sprouts Farmers Market; Confirming 'The Insider's' Reports] about the potential acquisition or merger.

Regarding the deal talks and negotiations, here's an update: First, discussions continue between representatives of Apollo/Smart & Final/Henry's and Sprouts Farmers Market over a possible acquisition of Henry's by Sprouts, or some sort of merger between the two grocery chains. But no deal has been reached.

Below (in italics) is a statement the editor of Fresh & Easy Buzz obtained today from Kim Rockley, a corporate spokesperson for Arizona-based Sprouts Farmers Market:

"There have been many similar rumors over the years about bringing Sprouts and Henry’s together, which is understandable given their common heritage. While there have been some discussions between the organizations in recent months, at this time there is NO deal in place to merge Sprouts and Henry’s. Our primary business focus right now is getting the new year off to a fast start, including the opening of the 55th Sprouts store, in Fort Worth, TX on January 26."

If you read my two columns, along with the report from Fresh & Easy Buzz (all linked above), you'll see what's been reported is that discussions have been going on between the respective parties over a deal - either an acquisition of Henry's by Sprouts Farmers Market or some sort of merger deal involving the two grocery chains - but not that a deal has been done. In fact, the reports go out of there way to make the fact clear.

The statement from Sprouts clearly verifies our reports that discussions have been going on. Beyond that we haven't drawn any further conclusions. In fact, that the statement says there is no deal in place, also confirms what I've been writing in my column.

And - the deal discussions between the respective parties are continuing.

A 'New York State of Mind' - No 'Big Apple' (or Chicago or Florida) For Tesco's Fresh & Easy

When Tesco crafted its original strategic plan for its El Segundo, California-based Fresh & Easy Neighborhood Market fresh food and grocery chain in 2006-2007, the plan, in terms of market region launches, went something like this: Southern California, Arizona, Nevada (late 2007 launches) and Northern California (launched into by 2009), followed by Chicago (2010), with New York and Florida as strong future, potential markets, with possible launch dates of mid-to-late 2011 or 2012.

As recent as late-2008-to-early-2009, Tesco's Fresh & Easy conducted what it calls "trend spotting" exercises, which, in addition to serving other uses, are designed to identify primarily headquarters employees who might be interested in transferring to new market regions as the fresh food and grocery chain prepares to enter the markets. Included in the exercises at the time were the following market regions: Northern California, Chicago, New York and Florida.

Chicago was the planned market launch after Northern California, which was supposed to be in 2009 but was postponed and is now set for this year, before the end of the first quarter.

But that was then and this is now. According to my sources, Chicago, New York, Florida and any other state not within delivery distance from the Fresh & Easy Neighborhood Market distribution center in Riverside County, California is off the table for 2011-2012.

Instead, Tesco plans to open all of what outgoing Tesco CEO Terry Leahy, incoming Tesco CEO Philip Clarke (in March 2011) and Tesco corporate director and Fresh & Easy Neighborhood Market CEO Tim Mason have said will be 245 new Fresh & Easy stores between now and the end of Tesco's 2012/2013 fiscal year, exclusively or primarily in its existing market regions - California, Nevada and Arizona. There are currently 155 Fresh & Easy markets in the three states. Tesco said it plans to have 400 Fresh & Easy stores be the end of fical 2012/13.

Tesco might open some of the 245 new stores it says it plans to open over the next two years in one or two states near California, Nevada and Arizona. However, the probability of it doing so are extremely slim in my analysis, because current plans call for all of the stores to draw product from the Riverside County distribution center, something Tesco said it planned to do when it reported its half-year results in October 2010.

Potential Western states like Colorado, New Mexico, Idaho, Oregon or Washington are just to far away to be served properly by the Riverside facility, even if Tesco doesn't think so. Fresh & Easy Neighborhood Market is going to have a difficult enough time servicing the Northern California stores from the Riverside County distribution center, which it plans to do starting in a couple months.

The reason Tesco needs the 400 stores, all pulling product from Riverside, is because the estimated volume from 400 stores is what it projects is needed to operate the Southern California distribution facility efficiently. It hopes that added efficiency will help it to stop operating the massive 800,000-plus sqaure-foot facility at such a loss, which is currently the case.

If Tesco were to expand to markets like Chicago, New York, Florida or elsewhere in the U.S. between now and the end of its 2012/13 fiscal year, at which time it says it will at least break-even with Fresh & Easy, the retailer would have to invest huge sums of money in building distribution centers, not to mention stores, along with investing more money for associated cost like labor expenses and marketing/promotional budgets.

Tesco's chances of breaking-even with Fresh & Easy Neighborhood Market in the time period are slim enough without market region expansion. With it the losses would be unbearable, particualry to incoming Tesco CEO Philip Clarke, who had no real hand in launching Fresh & Easy because he was in charge of the company's European and asian operations at the time, a position he will vacate when he becomes CEo in March.

The upshot: Look for all of the new Fresh & Easy stores Tesco opens this year to be in California, Nevada and Arizona, with all but a few being in California.

Right now, I won't go too far beyond that - as I'm not even sure incoming CEO Clarke will keep Fresh & Easy around for all of 2011. But I will offer this: You aren't going to see any Fresh & Easy stores opening in Chicago, New York or Florida in 2011 or 2012.

A 'New York State of Mind' - NRF Show in the 'Big Apple'

Lastly, as if enough isn't happening in the 'Big Apple,' the National Retail Federation (NRF) is holding its annual 'Retail's Big Show' Convention and Expo' at the Javits Convention Center in the city, through tomorrow.

This year marks the trade group's 100th annual convention and show, a milestone event. And befitting 100 years, the event is packed with seminars, presentations and exhibitors, including many with a focus on food and grocery retailing, as is the case each year.

There's so much going on in fact that I'll save a discussion of my observations for a future column. But until then a good place to learn about what's happening at the NRF show is at the trade association's website [here], which includes live-blogging by NRF staff members on some of the presentations going on.

As for 'The Insider,' I've departed the 'Big Apple' - for now.

But, I must say - I'm still in a 'New York State of Mind..."

But at this moment I'm moving much more to the beat of the less-old -school version of the song rather than to Billy Joel's hit tune. The version I'm referring to is the one by Jay-Z and Alcia Keys, called an 'Empire State of Mind.' (Watch the video and listen to the song here.)

Sprouts Farmers Market to Open Second Northern California Store in Roseville No Later Than Mid-April

Shoppers packed the Sprouts Farmers Market store, above, in Sunnyvale, California on grand opening day, June 2, 2010. The store is Sprouts' first in Northern California. It's also the grocer's milestone 50th store.

Phoenix, Arizona-based Sprouts Farmers Market, which we've reported (here) is in talks to acquire the Henry's Farmers Market chain from its owners, Apollo Global Management/Smart & Final, plans to open its second store in Northern California no later than mid-April of this year, Fresh & Easy Buzz has learned. The grocer hasn't yet announced the store's opening date.

The store, which we've reported on and written about previously, is in the Stanford Ranch shopping center in Roseville, California, which is in the Sacramento, California metropolitan area.

Sprouts is renovating a vacant building in the center, which previously was home to a Linens N' Things home furnishings soft goods store, for what will be its second farmers market-style format, natural and organic products-focused grocery store in the Northern California region.

Sprouts Farmers Market opened its first store in Northern California, a 30,865 square-foot market at 111 E. El Camino Real in Sunnyvale, on June 2, 2010. Sunnyvale is in the famed Silicon Valley, near San Jose, in the South Bay Area region. [See - June 5, 2010: Sprouts Farmers Market Opens First Northern California Store in Sunnyvale; Strikes Up Partnership With Local Non-Profit Farm

As we've previously reported, Sprouts has a third location, in the East Bay Area city of Dublin, which it also hopes to open in 2011.

The grocery chain is also searching for numerous additional store sites throughout Northern California, putting a focus on the San Francisco Bay Area and the Sacramento metropolitan region.

Timing is key

The timing of the early-to-mid April opening of the Sprouts Farmers Market store in Roseville co-insides with the opening date of Boulder, Colorado-based Sunflower Farmers Market's first Northern California store, which just happens to be in Roseville. The Sunflower Farmers Market stores are very similar in format and customer-positioning (not to mention name) to Sprouts Farmers Market.

The Sunflower Farmers Market store in Roseville is set to open in early 2011, according to CEO Mike Gilliland. [See - December 7, 2010: Sunflower Farmers Market Confirms Our Report It's Headed to Northern California; Roseville Store to Open April 2011 and December 9, 2010: Launching Sunflower Farmers Market Into Northern California is a 'Second Act' of Sorts For Founder-CEO Mike Gilliland.]

Like Sprouts, Sunflower Farmers Market has plans to open numerous stores in Northern California. Also like Sprouts Farmers Market, Sunflower is focusing its search for additional Northern California store locations in the Sacramento metropolitan and San Francisco Bay Area regions.

Henry's makes three - maybe

Smart & Final-owned Henry's Farmers Market, which opened its first store in Northern California at 8211 Laguna Boulevard in Elk Grove near Roseville in August 2010, has also been considering opening a store in Roseville. However, in light of the current negotiations between Sprouts Farmers Market and Henry's owners, private equity firm Apollo Global Management/Smart & Final, we can't report at this time that those plans remain in consideration.

Henry's Farmers Market currently has a proposal for a second Northern California store before the planning commission in Walnut Creek, California, which is in the Easy Bay Area, not far from Dublin, where Sprouts' planned third Northern California store is located. As far as we've been able to learn, those plans are still going forward at Henry's.

The planned Walnut Creek Henry's location would be a perfect fit for Sprouts Farmers Market, should the grocer's talks to acquire Henry's Farmers Market, which continue to go on this week, result in the privately-held, Arizona-based chain's buying Henry's.

New stores 'sprouting' up all over the region

The Sacramento region, including Roseville, is set to see an influx of new food retailing players and grocery stores this year, and into 2012.

In addition to new arrivals Sprouts, Henry's Farmers Market (summer 2010), which could soon be a combined Sprouts-Henry's, and Sunflower Farmers Market (in April), Tesco's Fresh & Easy Neighborhood Market currently has over 20 planned store sites in the Sacramento region (see our list here.) [Also see - November 22, 2010: Tesco's Fresh & Easy Neighborhood Market Plans Five New Stores in Northern California's Sacramento Region.]

Tesco's Fresh & Easy plans to open its first 12 stores in Northern California (none of the 12 are in the Sacramento region though) starting in March-April of this year. (click here for additional details on Fresh & Easy in Northern California.)

However, based on our most recent information, we don't expect the Tesco-owned fresh food and grocery chain to open any of its Sacramento-area stores until, at the earliest, late 2011. And it's possible the first stores in the region won't open until early 2012. [See - December 27, 2010: First Look at the Pacifica, California Fresh & Easy Neighborhood Market Store, One of the First Opening in Northern California in Early 2011 and December 14, 2010: Fresh & Easy Neighborhood Market to Open 5800 Third Street 'Flagship' Store in San Francisco Later in 2011 Than Originally Announced.

Additionally, Whole Foods Market, which has a store in Roseville and one in Sacramento, plans to open its third store in the Sacramento metro region this year, in Folsom.

Whole Foods is also scouting for additional store sites in the Sacramento region as part of a major new store growth initiative for Northern California, which its been undertaking for a few years, and accelerated in 2009-2010. [See - May 9, 2010: A Whopping 15 of Whole Foods Market's 41 New Stores in Development are in California - And Nine of The 15 Are In Northern CA

Further, as we reported earlier today, Walmart is close to acquiring its first smaller-format store location in Northern California, at Highway 65 and Second Street in the city of Lincoln, which is near Sacramento, and has plans to grab additional sites in the Sacramento region for the small-supermarket-style food and grocery stores. [See - January 10, 2011: Walmart 'Gets Real' With Smaller-Format Grocery Store Initiative in California; First Stores On Tap.]

One of the numerous Sacramento-area Fresh & Easy Neighborhood Market store sites is in Lincoln. Additionally, Tesco has two future Fresh & Easy stores planned for Elk Grove, where Henry's Farmers Market opened its Northern California flagship store in August 2010. [See - August 17, 2010: Henry's Farmers Market 'Beats' Fresh & Easy Neighborhood Market to Northern California Despite Multi-Year Head Start; Elk Grove Store Opens Tomorrow.]

Add to the mix popular discount retailer Target Corp., which is focusing aggressively on the Sacramento region with its "P-Fresh" food and grocery store initiative in Northern California. Target currently has "P-Fresh" grocery markets in 12 of its discount format stores in the Sacramento area, including in Elk Grove, Roseville and Lincoln, and has plans to add the markets inside additional general merchandise stores in the region this year. [See our September 26, 2010 story for details on Target's "P-Fresh" in Northern California: While Tesco's Fresh & Easy Neighborhood Market Postponed, Target Opened 42 'P-Fresh' Fresh Food and Grocery Markets in Northern California.]

Locally-based and family-owned supermarket chain Raley's, which has its corporate headquarters in West Sacramento, California, is the market share leader in the Sacramento region, followed by another family-owned chain, Modesto, California-based Save Mart Supermarkets, which operates supermarkets under its Lucky banner and discount warehouse stores under its FoodMaxx banner in the region. Safeway Stores, Inc., which is headquartered in the East Bay Area city of Pleasanton, about 90 minutes from Sacramento, is a close third in market share rankings in the Sacramento metro market, although its number one in all of Northern California.

Raley's, which has 134 stores and about $3.4 billion in annual sales, operates stores under the Raley's (super stores), Bel-Air (supermarkets) and Food Source (discount warehouse stores) in the Sacramento market region.

Sprouts' 'sprouting' new stores

Sprouts Farmers Market, which has 54 stores in Arizona, Colorado, California and Texas, currently has five new stores set to open this year. More new locations are set to be announced later this year.

In addition to the Roseville, California Sprouts market opening in April 2011, the four other announced new stores set to open this year are in Southern California - Westlake Village and Redondo Beach - and Texas - Fort Worth and Carrollton.

The Forth Worth store, which is at 4650 SW Loop 820 in the Overton Park Plaza shopping center, is set to open this month, on Wednesday, January 26.

Of course, if the discussions with Apollo Global Management/Smart & Final over acquiring the 46-store Henry's Farmers Market chain result in a deal for Sprouts Farmers Market, the Arizona-based chain, owned by members of the Boney family, the same family that started the Henry's chain, will nearly double its store count to over 100 units.

The Henry's Farmers Market stores are in California and Texas. The California stores - 36 in Southern California and one unit in Northern California - operate under the Henry's Farmers Market banner. The nine stores in Texas are under the Sun Harvest Farmers Market banner.

Meanwhile, regardless of which direction the deal negotiations end up going - they're looking positive for a deal right now, according to our sources - regarding a possible Henry's Farmers Market acquisition by Sprouts, the Arizona-base chain plans to continue to grow its store-count significantly in Northern and Southern California, along with in Texas (current major focus, along with California), Arizona and Colorado - plus potentially adding a couple new Western U.S. states - over the next few years.

Reader Resource

>Read our 2010 'Northern California Market Region Special Report' series here for a current primer on food and grocery retailing in the region. See the numerous linked stories at the end of the piece at the link.

Smart & Final-Henry's Tell Employees About Deal Discussions With Sprouts Farmers Market; Confirming 'The Insider's' Reports

Breaking Buzz

Henry's Farmers Market, which is owned by City of Commerce, California-based Smart & Final, on Friday (January 6, 2011) notified headquarters office workers, store managers and employees at its 46 stores in California and Texas that the company's owner, private equity firm Apollo Global Management, is in discussions regarding the sale of the Henry's chain to Arizona-based Sprouts Farmers Market, Fresh & Easy Buzz has learned.

Friday morning, Smart & Final's CEO, George Golleher, instructed senior executives at Henry's Farmers Market, which has its own separate headquarters in Irvine, California, to communicate to the employees that Apollo and Smart & Final are negotiating a possible sale of Henry's to Sprouts, but that a deal has not yet been completed, according to our multiple sources.

As part of the communication on Friday, the Henry's Farmers Market employees were told by the executives not to discuss the information with members of the media or anyone else but to instead refer any questions on the possible sale of the chain to Sprouts Farmers Market to Randall Oliver, Smart & Final's corporate spokesman.

Fresh & Easy Buzz's 'The Insider' columnist broke the news about a potential acquisition deal between Sprouts Farmers Market and Apollo/Smart & Final for its Henry's Farmers Market chain in a January 5, 2011 column, which you can read here: Will 2011 See Sprouts Farmers Market Acquiring Henry's Farmers Market? 'The Insider' Says it Could Be in The Cards. Also see 'The Insider's' column from yesterday for an update - January 7, 2011: Sprouts Farmers Market-Henry's Farmers Market Deal Negotiations Continue; End-Game Could Be Near.

In yesterday's column 'The Insider' noted that "selected Henry's Farmers Market" employees had been notified about the deal talks with Sprouts between January 5 and January 7. That universe of employees has now been extended to store-level managers and employees, as of Friday, January 7.

The Friday communication to Henry's store employees by Smart & Final confirms 'The Insider's' reports that deal discussions are indeed going on between Apollo/Smart & Final and Spouts Farmers Market regarding the possible acquisition of Henry's by Sprouts.

Employees of Phoenix, Arizona-based Sprouts Farmers Market haven't been notified by company executives about the talks with Apollo/Smart & Final, according to our sources, which isn't a surprise since it would be the company making the acquisition and thus its employees aren't in the same position the Henry's employees would be in if a deal does happen.

A number of Sprouts employees are aware of the negotiations though, evidenced by a number of e-mails we've received from them following the publication of the January 5 column by 'The Insider,' who says he's currently working on a follow-up column about the deal negotiations and possible acquisition of Henry's Farmers Market by Sprouts Farmers Market.

The negotiations between representatives of Apollo/Smart & Final and Sprouts Farmers Market are ongoing. Sources tell us they will continue next week.

Sprouts Farmers Market-Henry's Farmers Market Deal Negotiations Continue; End-Game Could Be Near

The Insider - Heard on the Street

In my column on Wednesday (January 5, 2011) I wrote about talks and negotiations going on between representatives of Arizona-based Sprouts Farmers Market and Apollo Management/Smart & Final, regarding a possible acquisition of the Smart & Final-owned Henry's Farmers Market chain by privately-held Sprouts. Private equity firm Apollo Global Management owns Smart & Final, which is based in City of Commerce, California.

You can read the full column at this link - January 5, 2011: Will 2011 See Sprouts Farmers Market Acquiring Henry's Farmers Market? 'The Insider' Says it Could Be in The Cards.

Below are a few things I've learned since Wednesday, along with some other new information and analysis about a combined Sprouts and Henry's.

First, since the column appeared on Wednesday, serious talks and negotiations have continued between representatives of Sprouts Farmers Market and Apollo/Smart & Final, regarding a potential purchase of the Henry's Farmers Market chain by Sprouts. However, as of today, no deal has been done.

Based on current information, I don't expect the talks to result in a deal announcement in the next few days, if there is one, although unless one is directly participating in negotiations of this kind it's impossible to know the rate in which progress is actually being made. Instead, based on what I've learned, if a deal is done, expect it to be announced around the January 14-21 time period, at the earliest. And of course, it's possible a deal agreeable to both parties won't be reached. It's the nature of the acquisition negotiation dance, after all.

However, based on the information I have at this point in time, things are pointing more in the direction of a deal happening between the two parties rather than one not happening.

I've also learned that since publication of the column on Wednesday, Apollo/Smart & Final has told a select number of senior-level employees (beyond those doing the negotiating) that talks are going on about the possible sale of Henry's Farmers Market to Sprouts Farmers Market.

If the deal does happen, acquiring Henry's Farmers Market will roughly double Sprouts' store count and its annual sales. It will also bring back home some family food retailing history for Stan and Shon Boney, two of the four founders of Sprouts Farmers Market. Shon Boney is the CEO of Sprouts. His father Stan Boney is chairman of the board.

Stan Boney is Henry Boney's son and Shon Boney is the grandson of the "Henry" who started the Henry's Farmers Market format and chain. It was first called Boney's Marketplace in the early 1980's. In 1997 the family renamed it Henry's Marketplace, after Henry Boney's first name, changing it from the family's last name. Not long after Wild Oats Markets Inc., which Whole Foods Market, Inc. acquired in 2007, bought Henry's in 1999, it renamed the chain Henry's Farmers Market.

In late 2007-early-2008, Stan and Shon Boney and team at Sprouts Farmers Market set a strategic goal of having 100 stores open and operated in the Western and Southwestern U.S. in five years - late 2012-to-early 2013.

Sprouts Farmers Market is halfway there today. But a 2011 acquisition of or merger of some kind with Henry's Farmers Market would, along with the new stores Sprouts has set to open this year, put it well over the 100-store mark far in advance of that late 2012-early-2013 marker.

Sprouts Farmers Market, which is headquartered in Phoenix, Arizona, currently has its 54 stores in Arizona, Colorado, California and Texas. The Henry's Farmers Market chain has its stores in California and Texas. The California stores are under the Henry's Farmers Market banner, while the Texas stores are called Sun Harvest Farmers Market.

On of Sprouts' key strategic goals is to have more stores in California. Its been opening numerous new stores in Southern California since 2009, for example, and opened its first store in Northern California last year. Shon Boney has also said publicly he would like to have more stores in the San Diego region in far-Southern, California, where Sprouts Farmers Market has only a handful of units.

All but 11 (the Sun Harvest units in Texas) of Henry's 46 stores are in California. And all but one of the California stores, the grocer's first unit in Northern California, which like Sprouts Farmers Market, Henry's Farmers Market opened in 2010, are in Southern California, including a number of units in the San Diego area, a key strategic factor for Sprouts.

The California connection described above, along with the fact Henry's Farmers Market has the 11 Sun Harvest stores in Texas, where Sprouts Farmers Market has major growth plans, are the primary reasons CEO Shon Boney and Sprouts' board of directors, which in addition to chairman Stan Boney and son Shon includes the other two co-founders of the chain, Scott Wing and Kevin Easler, is in a nutshell why the retailer sees a good strategic fit in buying Henry's Farmers Market.

Lastly, it's important to note Sprouts Farmers Market and Henry's Farmers Market are essentially equals in terms of respective store-counts and annual sales. This logically should lead some readers to ask how privately-held Sprouts Farmers Market could come up with the money or financing to acquire it's near-equal-in-size Henry's.

The answer to this is to keep in mind that the owner of Smart & Final, and thus its Henry's Farmers Market chain, is a private equity firm, Apollo Global Management. As such, there exist a myriad of ways a private equity firm such as Apollo can structure deals with potential buyers like Sprouts Farmers Market, including owning an interest in Sprouts as part of the deal, helping to arrange financing, helping to bring in other investors, and so on. Private equity firms like Apollo buy, work to add value to, and then sell companies and entities like Henry's Farmers Market. And there are many ways to sell or spin off such companies and entities, including finding a match with a solid potential mate - another farmers market-format kissing cousin grocery chain, for example - and then making that match work in terms of financing and the like. That's the art of the deal.

I'll have more on the potential Sprouts-Henry's deal if and as new information warrants.

- '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. Below are links to 'The Insider's' first column of 2011, and to a selection of 2010 columns, published in Fresh & Easy Buzz.]

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

2010 columns

~December 30, 2010: Seven Predictions For Tesco's Fresh & Easy Neighborhood Market For 2011

~October 27, 2010: Save Mart CEO Bob Piccinini Poised to Make it to the 'Bigs' as Member of Golden State Warriors' Ownership Group

~October 8, 2010: Incoming Tesco CEO Philip Clarke Needs to 'Imagine' When it Comes to Fresh & Easy Neighborhood Market USA

~September 13, 2010: Reading Philip Clarke's Tea Leaves: Might A Mixed Corporate/Franchise Model Be in Fresh & Easy Neighborhood Market's Future?

~September 3, 2010: How the California Grocers Association and its Members Can Snatch Victory From the Jaws of the Defeat of California's Plastic Bag Ban

~August 22, 2010: Challenges & Opportunities: Tesco's Fresh & Easy Neighborhood Market Will Supply its Northern CA Stores From its Riverside County DC in Southern CA

~July 18, 2010: When it Comes to Northern California - its Competitors are Rome Burning and Tesco's Fresh & Easy Neighborhood Market is Nero Playing the Fiddle

~July 13, 2010: A Few Words on The Life and Death of Veteran Southern California Grocer Roger K. Hughes

~June 27, 2010: The Insider: Will Tesco Acquire Supervalu, Inc. and Change its 'Fresh & Easy' Game in America?

~June 12, 2010: Will Phil Clarke Shake Things up at Fresh & Easy Neighborhood Market USA When He Becomes Tesco CEO in 2011?

~May 20, 2010: Welcome to Discountopia USA

~April 29, 2010: Heard on the Street: There's Something About Albertsons ... In Southern California

Will 2011 See Sprouts Farmers Market Acquiring Henry's Farmers Market? 'The Insider' Says it Could Be in The Cards

The Insider - Heard on the Street

If my sources are correct - and they're right far more often than they are wrong - one of the first, if not the first, major U.S. food and grocery retailing industry acquisitions to happen in 2011 could be the purchase of the Henry's Farmers Market chain, which is owned by Smart & Final, which is in-turn owned by private equity firm Apollo Management, by privately-held competitor Sprouts Farmers Market.

Smart & Final is based in City of Commerce, (Southern) California. Its Henry's Farmers Market chain has a separate corporate headquarters, in the nearby Orange County city of Irvine. Sprouts Farmers Market is based in Phoenix, Arizona.

My sources, who've asked to remain anonymous for occupational and other related reasons, tell me the deal, which is in discussion between the parties, could happen soon, although it hasn't been finalized and therefore isn't a "done deal."

Behind the potential sale are two key recent motivators, as well as a basic private equity strategy, for Apollo Management, which owns Smart & Final and thus Henry's Farmers Market.

The first recent motivator is that the private equity firm lost at least $40-$50 million (and possibly more), according to my sources, on Smart & Final's SmartCo Foods venture in the Denver, Colorado market in 2010.

Smart & Final opened five SmartCo Foods stores in metro Denver over a three month period, starting in June 2010. In November, less than five months later, it announced it was closing all five stores and pulling out of the market. The five stores are all now closed. [You can read Fresh & Easy Buzz's reports on the move here.]

Second, Apollo plans to launch some sort of public stock offering later this year, and as a result has been evaluating its portfolio of owned companies more closely than it normally would over the last few months.

Additionally, private equity firms like Apollo Management buy companies and entities like Henry's Farmers Market for the express purpose of adding value and eventually selling them. That's how the firms make money for their investors. Apollo has followed that path with Henry's, investing a considerable amount of money in Henry's since acquiring it in October 2007, for the purpose of improving and growing the chain, with the hope doing so will add value and thus result in a profit when it sells it.

Lastly, but far from least, my sources say Sprouts Farmers Market is interested in buying Henry's as a way to grow it business, as well as gaining the secondary bonus of taking one of its three similar format competitors off the market. Sprouts, Henry's and Sunflower Farmers Market all operate very similar formats and stores in the Western U.S.

According to my sources, Apollo Management doesn't currently have Smart & Final up for sale.

The Sprouts Farmers Market and Henry's Farmers Market formats are nearly identical - kissing cousins if you will - and not by accident.

The Boney family, members of which also founded Sprouts Farmers Market in 2002, created the Henry's Farmers Market format, a combination natural-organic-conventional food and grocery store, with a focus on fresh produce merchandised farmers market-style in departments that comprise about a third of a store's total square-footage, decades ago in Southern California.

The first "Henry's" (in terms of the format's inspirational origins) was a fresh produce stand operated under the name "Boney's," which was started on a street corner in San Diego by Henry Boney, in 1943.

Henry Boney's plans didn't include just owning a fruit stand. In the 1950's he branched out, owning and operating three grocery stores in Southern California: Boney's, Bradshaw's and Superama.

In 1956, the Boney family sold the grocery stores and switched formats, opening and building a chain of convenience stores called Speedee Mart, which it sold eight years later, in 1964, to Southland Corp/7- Eleven.

A little over a decade later, in 1976, the entrepreneurial Boney family started a health-food chain, Windmill Farms, which it later sold.

Shortly after selling Windmill Farms, the family started the Boney's Marketplace natural foods' store chain in Southern California, which it renamed Henry's Marketplace in 1997, after Henry Boney's first name, replacing the family's last name as the banner for the stores.

Wild Oats Markets Inc. purchased Henry's Marketplace in 1999, and renamed it Henry's Farmers Market.

Whole Foods Market, Inc. acquired Wild Oats in 2007. One of the first things Whole Foods did after the deal was to sell the Henry's chain, which consisted at the time of 35 Henry's Farmers Market (in Southern California) and Sun Harvest banner stores, to Apollo Management -owned Smart & Final for $166 million. The deal, which was completed in October 2007, also included a distribution center in Riverside County, California.

In 2002, two members of the very same Boney family founded the Sprouts Farmers Market chain in Arizona, along with Scott Wing and Kevin Easler. Stan Boney, the senior member of the family, is the chairman of the board, and Shon Boney is the CEO of Sprouts. Wing and Easler serve on the board. Doug Sanders runs the day-to-day operations of Sprouts, as its president and chief operator officer, reporting to Shon Boney. The first Sprouts Farmers Market store opened in Chandler, Arizona in 2002.

Like the Henry's Farmers Market format and stores, the Sprouts format and stores offer mostly natural and organic products, along with some conventional, and put a major focus on fresh produce, which is merchandised "farmers market-style" in departments that comprise about a third of the stores' total square-footage. A third "farmers market-style retailer is fast-growing Sunflower Farmers Market, which shares a history with both Sprouts and Henry's.

Since acquiring Henry's in October 2007, Smart & Final has added numerous stores, remodeled many existing units, and last year opened the first Henry's Farmers Market store in Northern California, in Elk Grove near Sacramento. A second Henry's store is planned for Walnut Creek, which is in the East Bay Area, about 35 miles from San Francisco. Plans for the store are currently being reviewed by the city.

Additionally, Smart & Final created a new natural and organic private brand for the Henry's stores, called Sun Harvest, which is the name of the stores the chain operates in Texas. The Sun Harvest brand, which has won a number of awards, replaced the former "Henry's" brand, which was the grocer's previous store brand of natural and organic food and grocery products.

Interestingly, Smart & Final has had plans since early-to-mid 2010 to expand the Henry's Farmers Market chain into Idaho, opening the first store in downtown Boise in late 2011 or early 2012. But in late December 2010 the retailer pulled out of the deal, deciding not to sign the lease for the Boise location, where it planned to put the first Idaho store, which it had been negotiating terms on for months. A Smart & Final spokesperson told a Boise television station in late December the retailer decided instead to focus on opportunities closer to home, meaning California and Texas, rather than entering Idaho. But my sources say the decision, which came on the heels of the SmartCo Foods store closures in Denver, has more to do with the possible sale of the Henry's Farmers Market chain to Sprouts Farmers Market, rather than a decision not to open stores in Idaho.

Sprouts Farmers Market, the larger of the two (but not by much) "farmers market-style" format chains in terms of total number of stores, currently has 54 stores in four states: Arizona, California (southern and northern), Colorado and Texas. The stores range in size from 23,000-37,000 square-feet. Annual sales at fast-growing Sprouts Farmers Market are approaching $1 billion, according to my sources.

Like Henry's, Sprouts opened its first store in Northern California, in the Bay Area city of Sunnyvale, in 2010. It has plans to open numerous additional stores in its newest market over the next couple years, including a store in Roseville, near Sacramento, this year, and in Dublin, which is in the Bay Area, in 2011 or 2012.

Sprouts is also making a major push in Texas, its second-newest market after Northern California. So far it plans to open three new stores in Texas this year.

Apollo Management-Smart & Final-owned Henry's Farmers Market currently operates 46 stores in two states - 37 units under the Henry's Farmers Market banner in California and nine stores under the Sun Harvest banner in Texas. The size of the Henry's and Sun Harvest banner stores are very close to Sprouts in terms of square-footage, averaging about 21,000 square-foot at the smaller end, to about 33,000 square-foot at the larger-end.

I estimate Henry's current annual sales to be in the $550 million-$650 million range, based on a variety of source information. The sales information isn't publicly released by the company.

If the deal to acquire Henry's Farmers Market goes through, Sprouts Farmers Market will nearly double both its store count - from 54 to 100 (not counting the new stores both chains plan to open this year) - and annual sales, which will make it not only a much bigger player in the natural-organic retailing sector, but also overall in the Western U.S. food and grocery retailing industry.

Some of the Henry's and Sprouts stores in Southern California are located fairly close together, so I suspect Sprouts Farmers Market would need to sell or close around a half dozen-to 10 or so units - it could be a Henry's store or an existing Sprouts unit, depending on a few variables - in the region if the acquisition becomes a reality.

I see the store duplications or redundancies to be of lessor concern in Texas, where Sprouts has only opened a handful of stores thus far. Sprouts would probably keep all or nearly all of the nine Sun Harvest stores and re-brand them under the Sprouts Farmers Market name.

I'm less sure Sprouts would re-brand the 37 Henry's Farmers Market stores "Sprouts Farmers Market," particularly right away, although eventually doing so makes more sense than it does to not do so. Most likely, if the acquisition does become reality, Sprouts will keep the Henry's Farmers Market name for a while at least, perhaps even considering using it as a second banner. However, based on information from my sources, I doubt if the grocer has even made that decision yet.

As of today, sources tell me the deal is being discussed but hasn't been finalized, which is important to note, as the devil is always in the details, particularly when it comes to acquisitions.

I'll have more on the potential Sprouts-Henry's deal if and as new information warrants.

- '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. This is 'The Insider's' first column for 2011. Below are links to 'The Insider's' 2010 columns, published in Fresh & Easy Buzz.]

~December 30, 2010: Seven Predictions For Tesco's Fresh & Easy Neighborhood Market For 2011

~October 27, 2010: Save Mart CEO Bob Piccinini Poised to Make it to the 'Bigs' as Member of Golden State Warriors' Ownership Group

~October 8, 2010: Incoming Tesco CEO Philip Clarke Needs to 'Imagine' When it Comes to Fresh & Easy Neighborhood Market USA

~September 13, 2010: Reading Philip Clarke's Tea Leaves: Might A Mixed Corporate/Franchise Model Be in Fresh & Easy Neighborhood Market's Future?

~September 3, 2010: How the California Grocers Association and its Members Can Snatch Victory From the Jaws of the Defeat of California's Plastic Bag Ban

~August 22, 2010: Challenges & Opportunities: Tesco's Fresh & Easy Neighborhood Market Will Supply its Northern CA Stores From its Riverside County DC in Southern CA

~July 18, 2010: When it Comes to Northern California - its Competitors are Rome Burning and Tesco's Fresh & Easy Neighborhood Market is Nero Playing the Fiddle

~July 13, 2010: A Few Words on The Life and Death of Veteran Southern California Grocer Roger K. Hughes

~June 27, 2010: The Insider: Will Tesco Acquire Supervalu, Inc. and Change its 'Fresh & Easy' Game in America?

~June 12, 2010: Will Phil Clarke Shake Things up at Fresh & Easy Neighborhood Market USA When He Becomes Tesco CEO in 2011?

~May 20, 2010: Welcome to Discountopia USA

~April 29, 2010: Heard on the Street: There's Something About Albertsons ... In Southern California