Apollo Global Management to Acquire The Fresh Market for $1.36 Billion

TFM_Logo_-_COLORSpecialty grocery chain The Fresh Market has agreed to be acquired by New York private equity firm Apollo Global Management. The Greensboro, N.C.-based company announced the $1.36 billion sale in a press release on Monday, four months after the The Fresh Market revealed the company would conduct a financial review and entertain the possible sale of the company.

“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,” said Rich Noll, lead independent director at The Fresh Market. “After an open and thorough process, our Board concluded that this offer maximizes value for our stockholders.”

The deal was unanimously approved by the company’s board of directors, with the exception of The Fresh Market founder and chairman Ray Berry, who recused himself from negotiations pertaining to the deal. Berry and his son Brett, who together own just under 10 percent of the company, elected to retain their shares.

The Fresh Market, which operates 184 locations across 27 states, has struggled in recent years as conventional supermarket chains have expanded their offerings to capitalize on consumers’ increasing interest in all things organic. In February it was reported that supermarket giant Kroger and TPG Capital LP were in the second round of an auction process to acquire the company alongside Apollo Global.

Apollo has acquired and invested in other grocery chains, including Sprouts Farmers Market and non-membership warehouse grocer Smart & Final. According to Bloomberg, Apollo made over 10 times its investment in Sprouts and nearly tripled its money in Smart & Final.

The Fresh Market’s stock price was up 24 percent on Monday following the announcement.

The company’s full press release can be found below:

GREENSBORO, N.C. and NEW YORK, March 14, 2016 (GLOBE NEWSWIRE) — The Fresh Market, Inc.(NASDAQ:TFM) (“The Fresh Market” or the “Company”), a growing specialty grocery retailer, and an affiliate of Apollo Global Management, LLC (NYSE:APO) (together with its consolidated subsidiaries, “Apollo”) today announced that they have entered into a definitive agreement (the “Merger Agreement”) whereby certain funds managed by Apollo, a leading global alternative investment manager, 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% over The Fresh Market’s closing share price on March 11, 2016, and a premium of approximately 53% over theFebruary 10, 2016 closing share price, the day prior to press speculation regarding a potential transaction.

The announcement follows an open and thorough review of strategic alternatives undertaken by The Fresh Market Board of Directors to maximize stockholder value. The transaction will be implemented through a cash tender offer at $28.50 per share. The transaction was unanimously approved by the Board of Directors of The Fresh Market, 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 approving the transaction. Ray Berry and Brett Berry, who collectively own approximately 9.8% 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 rollover the vast majority of their holdings in the transaction with Apollo. In addition, George Golleher, with whom Apollo has had a long-term operating partner consulting relationship and who was formerly Chief Executive Officer of Smart & Final and Ralphs Grocery Company/Food-4-Less during ownership by other Apollo affiliated funds, will be a co-investor with the Apollo funds in the transaction.

“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 Chief Executive Officer. “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.”

“We are delighted about this transaction with The Fresh Market, which was one of the early pioneers in small-box grocery, offering unique, delicious and healthy food with a keen focus on perishables,” saidAndrew S. Jhawar, Senior Partner and Head of the Retail and Consumer Group at Apollo. “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. 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. We look forward to partnering with Ray Berry, Brett Berry and George Golleher, and beginning our discussions with the executive management team and the over 13,000 team members at The Fresh Market so that we can assist the company in delivering the most inspiring and engaging food shopping experience in the industry with best-in-class customer service.”

The transaction – which is expected to close in the second quarter of 2016 – is conditioned upon 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 (HSR) Antitrust Improvements Act of 1976 and other customary closing conditions.

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, 2016. 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 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.

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, andDavis 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.

About The Fresh Market, Inc.

Founded by Ray Berry in 1982, The Fresh Market, Inc. is a specialty grocery retailer focused on providing high-quality products in a unique and inviting atmosphere with a high level of customer service. As ofMarch 14, 2016, the Company operates 186 stores in 27 states across the United States. For more information, please visit www.thefreshmarket.com.

About Apollo

Apollo is a leading global alternative investment manager with offices in New York, Los Angeles, Houston,Chicago, Bethesda, Toronto, London, Frankfurt, Madrid, Luxembourg, Mumbai, Delhi, Singapore, Hong Kong and Shanghai. Apollo had assets under management of approximately $170 billion as of December 31, 2015 in private equity, credit and real estate funds invested across a core group of nine industries where Apollo has considerable knowledge and resources. For more information about Apollo, visitwww.agm.com.