Apollo Global Management to acquire The Fresh Market

The Fresh Market Inc., Greensboro, N.C., a specialty grocery retailer, and an affiliate of New York-based Apollo Global Management LLC, a global alternative investment manager, said they have entered into a definitive agreement whereby certain funds managed by Apollo will acquire The Fresh Market for approximately $1.36 billion.

The $28.50-per-share all-cash offer by the Apollo Funds represents a premium of approximately 24 percent over The Fresh Market’s closing share price on March 11, 2016, and a premium of approximately 53 percent over the February 10, 2016, closing share price, the day prior to press speculation regarding a potential transaction, the companies noted.

The announcement follows an open and thorough review of strategic alternatives undertaken by The Fresh Market board of directors to maximize stockholder value. The board — other than Ray Berry, chairman and founder of The Fresh Market, who recused himself from all board discussions related to the review and from the board vote — unanimously approved the transaction. Ray Berry and Brett Berry, who collectively own approximately 9.8 percent of The Fresh Market’s outstanding shares, have agreed not to tender shares held by them into the tender offer and will both participate and roll over the vast majority of their holdings in the transaction with Apollo, the companies said.

In addition, George Golleher, with whom Apollo has had a long-term operating partner consulting relationship and who was formerly CEO of Smart & Final and Ralphs Grocery Co./Food-4-Less during ownership by other Apollo affiliated funds, will be a co-investor with the Apollo funds in the transaction, the companies noted.

“We are pleased to have reached this agreement with Apollo, which follows a comprehensive review of strategic and financial alternatives that generated interest from numerous parties.  After an open and thorough process, our Board concluded that this offer maximizes value for our stockholders,” said Rich Noll, The Fresh Market’s Lead Independent Director.

“We are excited about this transaction with Apollo, which recognizes the value of The Fresh Market’s strong brand and significant growth prospects while providing stockholders with an immediate and substantial premium,” said Rick Anicetti, The Fresh Market’s president and CEO. “Apollo is a highly regarded investor, bringing deep industry expertise and financial resources, and we look forward to working with them to build on our progress in achieving our strategic plan to deliver long-term profitable growth.”

Andrew Jhawar, senior partner and head of the Retail and Consumer Group at Apollo, said his company is "delighted" to enter the transaction with The Fresh Market.

“We believe there is a significant opportunity to enhance the brand, merchandise offering and price-value combination to make The Fresh Market a primary destination for food shoppers, while at the same time being committed to social responsibility through partnerships with local vendors and communities," he stated. "Our team at Apollo has had the tremendous fortune of having executed transactions in several consumables retailers and brands — such as Sprouts Farmers Market, Smart & Final, Hostess Brands and General Nutrition Centers, among others — that have undergone significant transformations under our strategic guidance, and we intend to bring that experience to bear at The Fresh Market."

The transaction — which is expected to close in the second quarter of 2016 — is conditioned on satisfaction of the minimum tender condition, which requires that shares representing more than 50 percent of the company's common shares (other than shares held by Ray and Brett Berry that are being rolled over) be tendered, the receipt of approval under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and other customary closing conditions, the companies said.

Under the terms of the Merger Agreement, the company may actively solicit alternative acquisition proposals during a 21-day period following the execution date of the definitive agreement, continuing until midnight on April 1.  There can be no assurances that this process will result in a superior proposal, and The Fresh Market does not intend to discuss any developments with regard to this process unless and until the company's board of directors makes a decision with respect to any potential superior proposal, the companies said.

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

J.P. Morgan Securities LLC is serving as the exclusive financial advisor to The Fresh Market, and Cravath, Swaine & Moore LLP and Richards, Layton & Finger, P.A. are serving as its legal advisors. Barclays, RBC Capital Markets, LLC, Jefferies and Macquarie Capital are serving as financial advisors to Apollo. The debt financing is being committed to by Barclays, Royal Bank of Canada, Jefferies Finance and Macquarie, and Davis Polk & Wardwell LLP is serving as their legal counsel.  Morgan, Lewis & Bockius LLP and Morris, Nichols, Arsht & Tunnell LLP are acting as legal advisors to Apollo and Paul, Weiss, Rifkind, Wharton & Garrison LLP is acting as legal advisor to Apollo as it relates to the debt financing.