Target: Smart & Final Inc.
Price: $813 million
Multiple: 10.4x Trailing 12 Months EBITDA
Sponsor: Apollo Management LP
Seller: Casino Guichard-Perrachon S.A.
Financial Advisor: Target: Goldman Sachs; Seller: BNP Paribas Securities and UBS Investment Bank; Buyer: Rothschild, Credit Suisse and Bear Stearns
Legal Counsel: Target: Skadden, Arps, Slate, Meagher & Flom LLP; Seller: Cleary Gottlieb Steen & Hamilton LLP; Buyer: Morgan Lewis & Bockius LLP
Despite the popularity of supermarket deals,
Apollo agreed last month to pay $22 per share to acquire Smart & Final, a Los Angeles, Calif.-based operator of non-membership warehouse stores that sell food, appliances and other food–preparation items. As part of the deal, Apollo is buying out the 55% equity stake of Paris, France-based Casino Guichard-Perrachon S.A., which has controlled Smart & Final for 23 years. The transaction is expected to close by the end of the second quarter.
A number of deals in the industry recently have sported similar multiples. According to Cathay Financial analysis, the Saker family’s 2006 take-private of central New Jersey chain Foodarama Supermarkets Inc. went for 10.2x its 12-month trailing EBITDA. Also in 2006,
Averaging about 17,500 square feet each in floor space, Smart & Final’s stores are designed to create a more convenient, accessible shopping experience than those of their larger, big-box competitors. A Costco Wholesale Corp. store, for instance, can be over 100,000 square feet. Smart & Final stores sell between 7,000 and 9,000 items each, depending on the store size, location and the type of customers who shop there. In 2006, the company produced about $2 billion in sales, and it has over 6,000 employees, according to its Web site.
The company, founded in 1871, has 253 stores in California, Nevada, Arizona and northern Mexico. It operates the Mexican stores as a joint venture with Calimaz, a grocery store chain in northwest Mexico. Etienne Snollaerts, Smart & Final’s president and chief executive officer, told the Los Angeles Times that new capital invested by the owners would help the company grow without major changes in how it does business. The company intends to add more stores in the Southwest and Mexico, but has no plans to expand to other states.
Apollo Management, which did not respond to a request for comment, has in the past owned stakes in Ralph’s Grocery Co., which is now owned by the Kroger Co. of Cincinnati, and in Oak Brook, Ill.-based Dominick’s Finer Foods LLC, which was bought by Safeway Inc. of Pleasanton, Calif. in 1998.
Apollo raised debt financing for the deal from Bank of America Securities, Bear Stearns and Credit Suisse. Goldman, Sachs & Co. acted as Smart & Final’s financial advisor and Skadden, Arps, Slate, Meagher & Flom LLP provided its legal counsel. BNP Paribas Securities Corp. and UBS Investment Bank acted as financial advisors to Groupe Casino while Cleary Gottlieb Steen & Hamilton LLP was retained as its law firm. Rothschild, Inc., Credit Suisse and Bear Stearns acted as financial advisors to Apollo, while Morgan Lewis & Bockius LLP provided legal advice.—E.B.