Apollo Funds said yesterday that it plans to acquire 59-unit Hispanic grocery chain Cardenas Markets from investment firm KKR. Terms of the deal were not disclosed.
According to the announcement, "Upon completion of the transaction, Apollo Funds will combine Tony’s Fresh Market, a Chicago-based portfolio company, with Cardenas Markets, which operates across California, Nevada and Arizona, to create a leading Hispanic- and ethnic-focused grocer. Both companies will continue to operate under their respective brands and local leadership, while benefitting from greater scale, complementary capabilities and an expanded operating footprint."
The combined entity will have close to 80 stores, will be led by current Cardenas CEO Doug Sanders, and will have approximately $1.8 billion in combined revenues. Sanders will serve as CEO of the combined company and Cardenas chain, while Frank Ingraffia will continue to serve as the CEO of the Tony’s chain.
Ther announcement notes that "in 2016, KKR acquired Cardenas Markets from the Cardenas family with the thesis of transforming the business into a growth platform. Under KKR’s ownership, Cardenas doubled in size through a combination of organic growth and strategic acquisitions."
Scott Moses, Managing Director and Head of Grocery, Pharmacy & Restaurants Investment Banking at Solomon Partners, served as lead financial advisor to Cardenas and KKR.
In a statement, Moses said, "I first met Doug nearly 17 years ago, when he was with Sprouts, which was at that time a small, growing specialty grocer with just a few stores in Phoenix. We then worked together on Sprouts’ mergers with Henry’s and Sunflower in 2011 and 2012, respectively, to build the foundation from which Doug and Apollo then transformed Sprouts into a multi-billion-dollar public company, with hundreds of stores and over 35,000 employees across the country."
- KC's View:
We are living in a world where in order to survive, the big have to get bigger, and the small have to find safe harbors - through mergers, acquisitions and/or alliances - that will allow them to fight above their weight class.
That's what is happening here. The best deals - and I suspect that this will be one of those - are the ones that create scale while still allowing for individuality and innovation at the micro level.