Cencosud reaches the US market with the acquisition of The Fresh Market chain – AméricaEconomía

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Cencosud reaches the US market with the acquisition of The Fresh Market chain - AméricaEconomía

On Tuesday afternoon, the Chilean holding company Cencosud announced the purchase of 67% ownership in The Fresh Market Holdings, Inc. chain by associating with Apollo Global Management in the United States.

The information was released through an essential fact before the Chilean Financial Market Commission (CMF), and then detailed to the media in a virtual conference headed by the company’s CEO, Matías Videla.

In a statement, the conglomerate of Chilean origin Cencosud details that it has agreed to invest US$676 million in the purchase of a combination of primary and secondary capital in The Fresh Market. As a result of this transaction, Cencosud will acquire a 67% stake and current shareholders will own the remaining 33%.

In addition, US$265 million of cash will go to The Fresh Market’s balance sheet, reducing the Company’s net leverage to 2.7 times its EBITDA.

Cencosud will finance the investment with its own cash flow from its operation. Upon completion of the transaction, Cencosud’s gross leverage will be approximately 3.1 times, and The Fresh Market’s debt will be refinanced to improve its capital structure from an interest rate and maturity extension perspective.

“It is a great step for Cencosud to enter the United States, in accordance with our diversification strategy. I am sure it will be a tremendous and very profitable experience for both companies,” said Heike Paulmann, Chairman of the Board of Directors of Cencosud.

While Matías Videla, CEO of Cencosud, highlighted The Fresh Market as one of the best supermarkets in the United States, “widely recognized by market specialists and consumers alike, given its customer-centric culture, excellence in fresh products and memorable shopping experience in their stores (…) We are very happy to make our first investment in the North American market through a partnership with a prestigious company like Apollo Global Management, with extensive experience in the retail market. Our team is very excited to work hand-in-hand to accelerate the growth and value of the company.”

PRESENCE IN SIX COUNTRIES

With this transaction, Cencosud expands its geographic diversification with approximately 12% of proforma revenues coming from the United States, a traditionally defensive market with a stable currency.

Cencosud has a presence in six countries on the continent: Chile, Argentina, Peru, Colombia, Brazil and now several states in the United States.

The Fresh Market has a presence in the city of Buenos Aires, Argentina, but only with a delivery format.

This association also provides Cencosud with access to the US market where there is much greater depth in the capital markets, highlights the communication to the media.

The CEO, Matías Videla also added that 60% of the purchase price will be paid with cash generated from the Cencosud businesses and 40% with additional debt. With this, Cencosud’s gross leverage will go from 2.6 of its Ebidta, Dec 2021, to 3.1% times Ebidta.

“With this, Cencosud continues to maintain a solid financial position”, Videla clarified. “This investment does not affect or diminish the growth of the rest of the countries.”

“Some time ago the board of directors indicated this need and that is why we worked hard with the team and we were looking at operations in the US and we found these requirements that generated interest. It is heavily based on perishables, customer service level is memorable. It generates an affinity for us with what Cencosud seeks to generate in consumers”, he indicated.

It has been an intense 2022 for Cencosud, it recently had its ordinary shareholders meeting in which it renewed the board of directors, incorporating more women to it. Also on that occasion Horst Paulmann, its founder, stepped down as chairman of the board and became honorary chairman.

read also: “Friday recharged for Cencosud, concrete acquisition of Giga supermarkets and reports record income.”

Just a week ago, the firm presented record profits in its financial statements for the first quarter, both in the part of Cencosud SA that includes the supermarket business as well as retail Y deliveriesplus Cencosud Shopping that concentrates the real estate part of the holding.

They also announced the purchase of the Giga chain in Sao Paulo, with a cash & carry, for $100 million. Traditionally, the Brazilian market, where the holding company landed in 2010, had not been as successful for Cencosud as its operations in Chile, Argentina and Peru.

PREMIUM SUPERMARKET

The Fresh Market is a premium specialty supermarket that offers a variety of high-quality fresh produce and prepared food offerings in its stores. hand-crafted goods, premium baked goods, fresh flowers, freshly cut meats and carefully selected produce for holidays and special occasions.

The company is a specialty store that focuses on organic, vegan, and local produce and products, with an additional focus on ready-to-eat and ready-to-cook foods (~15% of sales)

Founded in 1982, headquartered in Greensboro, North Carolina, the Company has 160 stores (100% leased) in 22 states, with an average store size of approximately 1,950 m².

In 2021, The Fresh Market reported revenues of US$1,933 million, with an adjusted EBITDA of US$196 million and an EBITDA margin of 10.2%. Sales are made up of ~70% perishable products (compared to 35% of traditional supermarkets), with an offer focused on fresh products that helps drive a solid performance of the EBITDA margin, and ~15% of prepared dishes, which is a key element for growth and profitability.

Existing shareholders, including Apollo, the Berry family and Company management, will retain a minority interest in The Fresh Market.

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