Dive Brief:

• Bodega Latina Corp., the owner of the Fiesta Market and El Super chains, announced on Friday that it has agreed to acquire Smart & Final from private equity owner Apollo Global Management for approximately $620 million plus debt. 
• Smart & Final will operate as a separate unit under Grupo Comercial Chedraui, Bodega Latina’s parent company, and will retain its existing management team, according to the announcement. The companies expect the transaction to close in the second or third quarter of this year, pending U.S. and Mexican regulatory approval and other closing conditions.
• The deal more than triples Bodega Latina’s U.S. store count and promises to expand Smart & Final’s footprint and help it reach even more Hispanic consumers.

Dive Insight:

Friday's acquisition announcement is the latest corporate handoff for a Smart & Final chain that has gone through numerous owners and operational adjustments in recent years. 

Apollo Global Management acquired Smart & Final two years ago for $1.1 billion from Ares Management — the private equity firm’s second ownership stint after controlling the company from 2007 to 2012, when it sold the warehouse retailer to Ares for $975 million. In 2020, Apollo sold off Smart & Final’s foodservice stores to US Foods for $970 million.

Prior to Apollo’s second ownership period, Smart & Final spent five years as a public company, during which its stock price fell by nearly half. The chain has recently prioritized building out its Extra store format, which focuses on a wider assortment of perishable, organic and household products than its legacy stores and now accounts for 198 of the company’s 254 locations.

Smart & Final claims it is one of the country’s oldest grocery operators, with roots stretching back to 1871. The company operates warehouse stores that sell a variety of pack sizes to consumers and business clients, and promotes prices below competing operators. The unique model has confounded investors in the past, but Bodega Latina and its parent company see a path to grow the brand in the U.S., noting in its announcement “opportunities in existing and potentially new geographies.”

Bodega Latina said integration efforts between the two companies will be minimal, with Smart & Final continuing to operate independently with its existing management team. But the announcement did note some opportunities for cross-pollinating the businesses, like adding money transfer services between consumers in the U.S. and those abroad.

“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 Grupo Commercial Chedraui, said in a statement.

Data from market research firm Numerator shows that Hispanic and Asian consumers make up the majority of Smart & Final shoppers, underscoring the opportunity for Bodega Latina to leverage its marketing and assortment expertise to draw more Hispanic consumers to the chain. Nielsen estimates that by 2023, Latinx consumers in the U.S. will have more than $1.9 trillion in buying power.

Bodega Latina first entered the U.S. grocery market in 1997 with a store in South Gate, California. It now operates 64 El Super stores, including three El Super Fresh stores, across five states along with 59 stores in Texas under the Fiesta Mart brand, which it acquired in 2018. 

Smart & Final operates 254 stores under its Smart & Final and Smart and Final Extra formats, with locations in California, Arizona and Nevada. The company also has an additional 16 stores in Northwestern Mexico operated through a joint venture. In fiscal 2020, Smart & Final generated $4.1 billion in sales and adjusted earnings before income taxes, depreciation and amortization (EBITDA) of $167 million.