Smart & Final Stores Inc.’s stock soared Wednesday after the grocery retailer agreed to be acquired by the investment firm Apollo Global Management for nearly $500 million in cash.
The stock jumped $1.10, or 20%, to $6.49 a share after Apollo said late Tuesday that it would offer $6.50 for each share of Commerce-based Smart & Final and take the company private. Including Smart & Final’s debt, the deal has a total value of $1.1 billion, the companies said.
Smart & Final, which was founded more than a century ago, operates 324 stores in California, Oregon, Washington, Arizona, Nevada, Idaho, Montana, Utah and Mexico. Its sales last year totaled $4.7 billion.
This would be the second time New York-based Apollo controls Smart & Final. The firm owned the grocer from 2007 to late 2012 until it sold the company to another investment firm, Ares Management, which currently owns about 60% of the shares.
Smart & Final then sold a stake to the public in September 2014 with an initial public offering priced at $12 a share.
“We are very excited for our funds to be re-acquiring Smart & Final and expect to leverage Apollo’s deep expertise and history of success in food retail to support the company as it embarks on its next chapter,” Andrew Jhawar, senior partner and head of the consumer and retail group at Apollo, said in a statement.
Smart & Final faces fierce competition, however, especially in Southern California from the likes of Kroger Co., which owns Ralphs and Food 4 Less, and Albertsons Inc., which operates Vons and Pavilions. Another rival is Whole Foods Market Inc., now owned by Amazon.com.
Smart & Final in the last two years has taken major impairment and valuation charges that left it with net losses of $112.2 million and $138.9 million in 2018 and 2017, respectively. Excluding those and other one-time items, Smart & Final’s adjusted net income last year was $31.4 million, down from $33.7 million in 2017.
At the same time, Smart & Final’s stock has slumped since mid-2017, when it traded for $13 a share.
The company operates 257 stores under the Smart & Final banner, including its larger-format Smart & Final Extra! stores, along with 67 Smart Foodservice stores in Northern California and the Pacific Northwest that sell to restaurants, caterers and others in the food-service industry.
The proposed buyout “is a testament to the strength of the Smart & Final’s franchise, the quality of our store banners and the talent and expertise of our people,” David Hirz, Smart & Final’s chief executive, said in a statement.
The warehouse-style grocery chain has a deep history in Los Angeles, stretching back to the 19th century.