The private equity owner of The Fresh Market is making another bet on the booming grocery business as quarantined Americans cook more of their meals at home.
Apollo Global Management Inc. and a group of other investors have acquired $1.75 billion of convertible preferred shares in Albertsons Cos., representing a 17.5% stake in the company. The transaction is expected to close by June 15.
“Albertsons Companies is pleased to work with Apollo and its co-investors. Apollo knows our industry and business model well, given its significant prior history of successful investments in the grocery sector. We believe the investment led by the Apollo Funds represents a vote of confidence in both our business and our long-term strategy,” said Vivek Sankaran, president and CEO of Albertsons. “We are also proud to have the continued support of our owners, a consortium led by Cerberus Capital Management, L.P., which also includes Kimco Realty Corporation, Klaff Realty LP, Lubert-Adler Partners LP, and Schottenstein Stores Corporation. We appreciate their tremendous support over the years in operations, technology and financing as we have grown our business and our platform, and especially during the COVID-19 pandemic as we focus on the safety and well-being of our associates, customers and communities."
According to Reuters, the deal with Apollo values Albertsons at around $10 billion, excluding its $8.7 billion debt burden as of the end of February. It gives Albertsons more time and a valuation floor in its pursuit of an IPO, for which it has registered with the U.S. Securities and Exchange Commission. Last year Apollo bought Smart & Final for $1.1 billion. Apollo bought The Fresh Market in 2016 for $1.36 billion.
“We are excited to work with the strong management team at Albertsons Companies, and believe the business has compelling growth opportunities ahead via e-commerce penetration, expansion of the company’s innovative Own Brands portfolio, and merchandising and marketing initiatives," said Justin Korval, partner in Apollo’s Hybrid Value Business, said. "This investment, led by our Hybrid Value team in partnership with our Credit platform, marks the third sizable transaction in the last month and exemplifies the breadth of Apollo’s capabilities and the creative capital solutions we can deliver to great companies.”
This first ran in sister publication Progressive Grocer.