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Cardenas to merge with Tony’s Fresh Market as part of Apollo acquisition

Investment firm Apollo Global Management plans to buy Hispanic grocer Cardenas Markets and combine it with the recent acquisition of Tony’s Fresh Market to form a nearly $2 billion ethnic-oriented supermarket operator.

Financial terms of the agreement, announced last night, were not disclosed. As part of the transaction, funds managed by affiliates of Apollo have agreed to acquire Cardenas from investment funds affiliated with global investment firm KKR, New York-based Apollo said.

Plans are for Cardenas and Tony’s to continue operating under their current brands and local leadership. Apollo said Cardenas Markets CEO Doug Sanders will continue in that role and serve as the combined company’s managing director, while Frank Ingraffia will continue as Tony’s Fresh Market CEO.

Tony’s Fresh Market

Apollo unveiled its agreement to acquire Chicago-area specialty grocer Tony’s Fresh Market in April.

Together, Cardenas and Tony’s generate approximately $1.8 billion in revenue from 78 stores in three western states and the Chicago area, enabling them to benefit from greater scale and capabilities complementary in a larger operational footprint, Apollo noted.

“Cardenas has grown significantly over the past few years under Doug’s leadership, and we are excited to accelerate its growth in combination with Tony’s in this next phase,” said Andrew Jhawar and Joanna Reiss, partners at Apollo Private Equity. , in a joint press release. “We are delighted to partner with Doug again following our highly successful investment in Sprouts Farmers Market, which Doug led as CEO under Apollo Funds ownership. Cardenas and Tony’s hold strong positions in the ethnic grocer space and together can leverage best practices in their complementary marketing strategies, merchandising, customer loyalty programs, and more. This transaction will combine the best of both retailers and provide greater opportunities and scale for the respective brands and teams as they continue to bring quality, affordable groceries to diverse communities.

Apollo announced its acquisition of Itasca, Illinois-based Tony’s Fresh Market in April. Started in 1979 by Italian immigrants Tony Ingraffia and Domenico Gambino, Tony’s operates 19 specialty grocery stores in the Chicago market and surrounding Illinois communities and is known for its wide assortment of fresh produce, prepared foods and offerings. multicultural. Apollo reported that several more stores are in development.

“Cardenas Markets shares similar values ​​to Tony’s, and I’m excited to join forces with Doug and the Cardenas team to continue to strengthen our operations and grow our differentiated offering,” said Frank Ingraffia, CEO of Tony’s. Fresh Market, in a statement. “Our brands have complementary strengths, and this partnership should give us more tools and expertise to scale and serve our customers with fresh, healthy and affordable food.

Cardenas, based in Ontario, California, currently operates 59 stores under the Cardenas Markets (51 locations), Los Altos Ranch Markets (seven locations) and Cardenas Ranch Markets (one location) banners in California, Nevada and Arizona. Founded in 1981, the retailer is one of the largest Hispanic grocery chains in the country and sources products from more than 500 vendors.

Doug Sanders-CEO Chairman-Cardenas Markets.jpgPlans call for Cardenas chairman and CEO Doug Sanders to serve as chief executive of the combined company. (Photo courtesy of Cardenas Markets)

And Cardenas’ store count is already expected to increase even before Tony’s suit. Last week, Cardenas unveiled a deal to acquire fellow Latino grocer Rio Ranch Market, expanding its footprint in Southern California. Based in Fontana, Calif., Rio Ranch operates six supermarkets in San Bernardino, Riverside, Chino, Perris, Banning and Fontana as well as a warehouse in San Bernardino. The transaction should be finalized by mid-July.

“Since joining Cardenas, we have made great strides in growing and improving our operations with the support of KKR, and I am thrilled at the opportunity for our team to now partner with Frank and Tony’s team, leveraging our collective strengths. Together, as two of the highest quality Hispanic and ethnic grocers, we can deliver even more value to the communities we serve,” commented Sanders, who is also president of Cardenas.

“Apollo Private Equity has an extensive track record of food retail success, and I am delighted to once again partner with Andy Jhawar and the Apollo team in this exciting next chapter for Cardenas,” said he added. “I would also like to thank KKR, who have been a great strategic partner over the past six years, helping us grow and professionalize the business.”

New York-based KKR acquired Cardenas Markets from the Cardenas family in 2016. Apollo noted that under KKR ownership, Cardenas had doubled in size through organic growth and strategic acquisitions.

“We greatly appreciate all that Doug and the management team have done to build a great company dedicated to bringing fresh, affordable groceries to the communities it serves, in keeping with the values ​​the Cardenas family instilled in the family. business,” Vishal Patel said. , CEO of KKR. “We are confident that Apollo and Tony’s Fresh Market are the right partners for Cardenas as it enters its next chapter of growth.”

The transaction is expected to close by the third quarter, pending customary closing conditions, according to Apollo. Solomon Partners acted as lead financial advisor to Cardenas and KKR. BMO Capital Markets also advised, and Kirkland & Ellis LLP acted as legal counsel to Cardenas and KKR. Paul, Weiss, Rifkind, Wharton & Garrison LLP acted as legal advisors to the Apollo Funds.

“We couldn’t be prouder of what we’ve achieved together in this transaction with Cardenas CEO extraordinaire Doug Sanders, KKR and the exceptional Cardenas team, whose more than 5,700 employees have helped the company serving as a mainstay for dozens of Latin American communities across the western United States for more than 40 years, particularly during the pandemic,” said Scott Moses, Managing Director and Head of Grocery Investment Banking , pharmacies and restaurants at New York-based Solomon Partners. Supermarket News in an email.

“I first met Doug almost 17 years ago when he worked at Sprouts, which at the time was a small, growing specialty grocer with only a few stores in Phoenix,” Moses said. . “We then worked together on the Sprouts mergers with Henry’s and Sunflower in 2011 and 2012, respectively, to build the foundation from which Doug and Apollo went on to grow Sprouts into a multi-billion dollar public company, with hundreds stores and more than 35,000 employees worldwide. country.”