Bodega Latina to Acquire Smart & Final for $620M

Smart & Final is on the move again.

The Commerce, Calif.-based non-membership warehouse club has agreed to a $620 million acquisition offer from Bodega Latina, owner of the El Super and Fiesta Mart chains and a division of the Mexico City-based Grupo Comercial Chedraui.

Smart & Final is owned by the private investor Apollo Global Management, which acquired it along with a since-spun-off foodservice supply business two years ago for $1.1 billion. Apollo sold Smart Foodservice to U.S. Foods in 2020 for $970 million, indicating that it sold the chains for about $500 million more than it paid to acquire them.

Smart & Final operates more than 250 stores under the Smart & Final and Smart & Final Extra! banners in California, Arizona and Nevada as well as 16 stores as part of a joint venture in Mexico. Smart & Final rung up sales of $4.1 billion, with adjusted EBITDA of $16.7 million, in the fiscal year ended Jan. 3. About 70% of Smart & Final’s sales are to consumers; business customers make up 30% of sales.

The transaction is expected to close in the second or third quarter, pending regulatory approval and other closing conditions.

The combination will create a scaled multiformat food retail platform in the U.S., with consolidated pro forma sales in excess of $11 billion, Chedraui said. Bodega Latina expects to run the chain separately from El Super and Fiesta with little integration under its existing management: It said it sees attractive internal growth initiatives at Smart & Final and the opportunity to add stores in existing and new geographic markets.

“Smart & Final, with a unique go-to-market and operating strategy, is an attractive fit that is aligned with our business strategy in the U.S., utilizing differentiated formats to focus on growing but underserved markets,” Carlos Smith, president and CEO of Bodega Latina, said in a statement. “With a brand that resonates with consumers, geographic fit in key markets, and a consistent record of profitable growth, Smart & Final will complement the platform we’ve built with El Super and Fiesta. We look forward to welcoming Smart & Final’s talented team of over 11,000 employees in working together to create a premier food retail platform in our markets.”

David Hirz, Smart & Final’s CEO, said the deal was a “a testament to the strength of Smart & Final’s franchise, the quality of our store banners and the talent and expertise that support the business.

“Under the ownership of Grupo Comercial Chedraui and Bodega Latina, Smart & Final will benefit from their guidance given their recognized and established position in the food retail space while contributing our own best practices and experience,” Hirz added. “Together we will further accelerate our collective growth. We are excited about the future as we embark on a new chapter in our history with a partner that is aligned and understands our strengths, culture and customer-centric philosophy. We would like to thank Apollo for its partnership and support in helping us grow our business to where we are today.”

Smart & Final was established in 1914 in Los Angeles by partners J.S. “Jim” Smart and H.D. “Hildane” Final. It debuted a cash-and-carry store in Long Beach in 1923. The company traces its roots to 1871 and the pioneering California grocery wholesaler Hellman-Haas, a descendent of which merged with Smart & Final in 1953.

Smart & Final’s unique concept—a kind of hybrid supermarket and cash-and-carry warehouse club in one—has often confounded investors: It has passed through numerous holders, including stints as a public company in recent years, while it focused on expanding the Extra! concept, which offers increased assortment (about 16,000 skus) and fresh foods at prices it says beat supermarkets and are competitive with larger-footprint paid clubs such Costco. Apollo’s acquisition in 2019—its second stint of ownership for the brand—came after officials said public investors had “persistently failed to reward the company’s uniqueness.”

Officials said Smart & Final would operate as a separate division from Bodega Latina’s other U.S. holdings, El Super, which operates 63 Hispanic-focused supermarkets in California, Arizona, Nevada, New Mexico, and Texas; and Fiesta Mart, the Houston-based Hispanic chain Bodega Latina acquired in 2017, which operates 60 store in the Houston, Austin and Dallas markets. The buyer sees Smart & Final as a means of benefitting stakeholders including employees, vendors and customers, on both sides of the border.

“As just one example, via our money remittance partnerships and network of stores, we currently help customers looking to provide support when needed to family living elsewhere; this transaction will only strengthen our ability to provide that type of support and value to many more customers and families,” José Antonio Chedraui Eguía, CEO of Chedraui, said in a statement.

The acquisition represents am EBITDA multiple of 3.7x, Chedraui said. Bodega Latina is financing the deal through committed financing from a group of banks and through assumption of certain Smart & Final debt, cash on hand or existing facilities. Concurrent with the transaction, Bodega Latina will be refinancing its existing debt.

RBC Capital Markets acted as the exclusive financial advisor and Bufete Robles Miaja, S.C. and Sidley Austin LLP as the legal advisors to Chedraui and Bodega Latina. Credit Suisse and Deutsche Bank acted as financial advisors and Morgan, Lewis & Bockius LLP acted as the legal advisor to Smart & Final and Apollo.