Sprouts, Henry’s Combine Operations

Sprouts Farmers Market and Henry's Farmers Market are combining operations under the majority ownership and sponsorship of New York-based private equity firm Apollo Management LP. The two natural food retailers were originally founded by the Boney family and have operated under separate owners for almost a decade.

Scott Moses and Gregory Grambling of New York-based Sagent Advisors gave financial advice to Sprouts, which has its headquarters in Phoenix. Henry's is based in San Diego.

The combined company will operate under the Sprouts Farmers Market name and will be one of the largest players in the  fast-growing "farmers' market" specialty segment of the retail food industry, as well as one of the largest grocers in the western United States, with annual revenues in excess of $1 billion.

Terms of the transaction, which is expected to close early in the second quarter 2011, were not disclosed.

The combined company will be managed from an operating perspective by the Boney family and will eventually operate all stores under the single name Sprouts Farmers Market. The new company will have 98 stores and more than 7,000 employees at the time the transaction is closed. The combined company plans to open up to 10 additional new stores during 2011.

Andrew S. Jhawar, senior partner at Apollo and co-head of its consumer and retail industry group said, "We are very excited about partnering with Stan Boney, Shon Boney, Doug Sanders and the thousands of employees at Sprouts and Henry's to help reunite these two great companies under the Boney family's leadership.”

After the combination, Jhawar said Sprouts is poised to become one of the largest U.s. specialty retailers with a focus on natural and organic products.

Stan Boney, Sprouts chairman, said the combination of the two companies represents “an exciting chapter in our family's lives, and we look forward to continuing to deliver on our mission of helping America eat healthier, live longer and spend less. Apollo is one of the most experienced and successful private equity firms in the nation and we are excited about their support for our business model and look forward to working together with Andy and his team."

The combination of the Sprouts and Henry’s businesses will occur through an equity investment and recapitalization of the existing Sprouts business by Apollo. A concurrent purchase of the Henry’s business will be made from Commerce, Calif.-based Smart & Final Holdings Corp., an Apollo portfolio company since 2007. Sagent Advisors acted as financial advisors to Sprouts. Following the transaction, Apollo will be the majority owner of Sprouts and will continue to be the principal equity owner of Smart & Final Holdings.

Apollo Management, LP and its subsidiaries are affiliates of Apollo Global Management, LLC. The global alternative asset manager reported $58 billion in assets under management as of September 30, 2010; the firm’s investments in retail and consumer-oriented businesses have included Smart & Final, Claire’s Stores, CKE Restaurants, General Nutrition Centers, AMC Entertainment, Rent-A-Center, Ralphs Grocery Co., Dominick’s Supermarkets, Zale Corporation and Proffitt’s Department Stores.