Smart & Final Stores Inc., a value-oriented food and everyday staples retailer headquartered in Commerce, California, has entered into a definitive merger agreement with certain investment funds managed by affiliates of Apollo Global Management LLC. According to the agreement, announced April 16, Apollo Funds will acquire all the outstanding shares of Smart & Final’s common stock for $6.50 per share in cash.
The purchase price represents a premium of approximately 25 percent over Smart & Final’s average closing share price over the past 24 trading days, since the company’s earnings announcement on March 13.
Kenneth Tuchman, chairman of the Strategic Review Committee of Smart & Final’s Board of Directors, who led a strategic review process, said, “This transaction is the result of diligent analysis and thoughtful strategic deliberations by our board of directors over many months. Our board, with the assistance of independent financial and legal advisors, determined that this transaction, upon closing, will deliver immediate, significant and certain cash value to our stockholders.”
David Hirz, Smart & Final’s CEO, said, “This transaction is a testament to the strength of Smart & Final’s franchise, the quality of our store banners and the talent and expertise of our people. Under the ownership of the Apollo Funds, Smart & Final will benefit from Apollo’s strategic guidance, which will help us accelerate our existing strategy in a dynamic industry environment. We are excited about the future as we embark on a new chapter in our almost 150-year history, with a strategic partner that understands our strengths, culture and customer-centric philosophy. We would like to thank Ares Management for its partnership and support in helping us grow our business to where we are today.”
“We are pleased to fully support this transaction and we would like to thank the Smart & Final management team for its strong commitment and execution over the past seven years,” said David Kaplan, Smart & Final’s chairman of the board and co-founder of Ares Management. “We wish the management team and employees continued success under new ownership.”
Andrew Jhawar, senior partner and head of the consumer and retail group at Apollo, said, “We are very excited for our funds to be re-acquiring Smart & Final and expect to leverage Apollo’s deep expertise and history of success in food retail to support the company as it embarks on its next chapter. The unique differentiation and strong value proposition of both the Smart & Final and Smart Foodservice banners are evident to us and we welcome the opportunity to augment and enhance the experience for the company’s household and business customers. We look forward to working with the management team as well as the over 12,000 team members to capitalize on the company’s position in the marketplace.”
Smart & Final was previously owned by funds managed by affiliates of Apollo from 2007 to 2012 before its sale to Ares Management L.P. in November 2012.
The transaction will be completed through an all-cash tender offer. The Smart & Final Board of Directors unanimously recommends that Smart & Final stockholders tender their shares in the offer.
The transaction is expected to close by the third quarter of 2019.
Upon completion of the transaction, Smart & Final will be a privately held portfolio company of the Apollo Funds, and Smart & Final’s ordinary shares will no longer be listed on the New York Stock Exchange.
Jefferies LLC, Citigroup Global Markets Inc. and Centerview Partners LLC are serving as financial advisors to Smart & Final, and Kirkland & Ellis LLP is serving as its legal advisor. Gibson, Dunn & Crutcher LLP is serving as legal advisor to the Strategic Review Committee of the Smart & Final Board of Directors. Morgan, Lewis & Bockius LLP is acting as legal advisor to the Apollo Funds, and Paul, Weiss, Rifkind, Wharton & Garrison LLP is acting as legal advisor to the Apollo Funds as it relates to the debt financing.
Smart & Final operates 257 stores under its Smart & Final banner. Its larger format stores, Smart & Final Extra! stores, combine the warehouse store with traditional grocery offerings like farm-fresh produce and natural and organic options, to provide a one-stop shop for all. Smart & Final also operates 67 stores located in the Pacific Northwest and Northern California under its Smart Foodservice banner, which sell foodservice offerings in a “no-frills” warehouse format primarily to business customers such as restaurants, caterers and a wide range of other foodservice businesses. Founded in 1871, Smart & Final remains committed to giving back to its communities through employee volunteer opportunities and donations to local nonprofits.