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LOS ANGELES - Non-membership warehouse retailer Smart & Final Inc. yesterday said it agreed to be acquired by an affiliate of Apollo Management, L.P., a private equity firm, for approximately $812.9 million, and that the new owner will buy stakeholder and French retailer Groupe Casino out.
The deal for Smart & Final is for $22 per share in cash, and is expected to close in the second quarter of 2007, the retailer said.
"Apollo's exceptional history of successful retail investing shows that we can leverage their experience to improve our operational metrics and return on capital," said Etienne Snollaerts, Smart & Final's president and c.e.o. "As our 23-year association with Groupe Casino concludes, I'd also like to acknowledge the tremendous support which they have offered to Smart & Final in developing our current business."
The Apollo affiliate has also entered into a stock purchase agreement with Paris-based Casino Guichard-Perrachon, S.A., which owns approximately 55 percent of Smart & Final's common stock, to purchase the subsidiary of Groupe Casino which directly owns approximately 52.2 percent of Smart & Final's common stock. This transaction is conditioned on the concurrent closing of the Smart & Final merger.
The purchase price for the subsidiary will be based on the number of Smart & Final shares it owns at the same $22 cash price per share to be paid in the merger. The remaining approximately 2.8 percent of Smart & Final's common stock held by Groupe Casino will be acquired pursuant to the merger.
"We have long admired the unique specialty food retail position of the Smart & Final and Smart Foodservice Cash & Carry stores," said Andy Jhawar, a senior partner of Apollo. "The company's position in the marketplace will serve as a strong platform for continued evolution and future growth of its business model. We look forward to working together with Smart & Final to position the company for continued long-term success."
The proposed transaction is subject to approval by Smart & Final's stockholders, as well as other customary closing conditions, including the expiration of the Hart-Scott-Rodino antitrust waiting period. Groupe Casino and its subsidiaries have agreed to vote all of their Smart & Final shares pursuant to the terms of the stock purchase agreement.
In other news, Smart & Final saw a 7.6 percent or $34.6 million jump in sales for its 12-week fourth quarter ended December 31, 2006, reaching a total of $491.4 million. Its Q4 2005 sales were $456.8 million.
Income from continuing operations was $5.1 million or 16 cents per share for the latest quarter, compared to $9.4 million, or 29 cents per share. Comparable store sales growth for the fourth quarter was 5.7 percent. Gross margin from continuing operations increased $7.9 million, or 10.4 percent, to $84.7 million for the quarter compared to $76.8 million.
The company opened three new stores and relocated one store during the quarter, and closed one store, bringing its total number of stores to 253, compared to 249 during the same period in 2005.
For the full year 2006, sales were $2.1 billion, an increase of 5.1 percent over 2005's $2 billion. Comparable store sales growth for 2006 was 2.8 percent.
Smart & Final's 2006 gross margin increased 4 percent to $347.5 million, compared to $334.1 million. As a percentage of sales, gross margin decreased to 16.5 percent, compared to the prior year's 16.7 percent, due primarily to a lower profit rate on product sales.
Operating and administrative expenses increased 10.3 percent to $305.3 million for 2006 compared to $276.8 million for 2005.
Income from continuing operations for the year $20.8 million, or 65 cents per share, compared to $22 million, or 69 cents per share for 2005 - a number that included an $8.8 million tax litigation charge.
Costs associated with the company's assessment of strategic alternatives through the end of Q4 2006 were $2.8 million pre-tax, or 5 cents per share.
Smart & Final operates 254 non-membership warehouse stores for food and foodservice supplies in California, Oregon, Washington, Arizona, Nevada, Idaho, and northern Mexico.