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Acquisition Announcement Sends Smart & Final Stores Shares Soaring Over 20% Wednesday Morning

Daniel Miller, The Motley Fool

What happened

Shares of Smart & Final Stores (NYSE: SFS), a value-oriented food retailer combining a warehouse store style with traditional grocery offerings to provide a one-stop shop, are soaring over 20% Wednesday morning after it agreed to be acquired by funds managed by affiliates of Apollo Global Management (NYSE: APO).

So what

Smart & Final Stores announced Tuesday afternoon that it had entered into an agreement to be acquired by private-equity firm Apollo Global Management for $6.50 per share in cash. Shares of SFS jumped to $6.48 Wednesday, nearly matching the buyout price, a sharp increase from its Tuesday closing price of $5.39 per share and roughly 25% higher than its average closing share price over the past 24 trading days, following its March 13, 2019 earnings announcement.

Shopping cart in a grocery store aisle.

Image source: Getty Images.

"We are excited about the future as we embark on a new chapter in our almost 150-year history, with a strategic partner that understands our strengths, culture and customer-centric philosophy. We would like to thank Ares Management for its partnership and support in helping us grow our business to where we are today," said David Hirz, Smart & Final's chief executive officer, in a press release.

Now what

Tuesday's acquisition announcement begins the newest chapter in an ongoing story for Smart & Final Stores investors. Apollo Global Management previously owned the company before selling to Ares Management Corp, a similar buyout firm, in 2012 for $975 million including debt. But reacquiring Smart & Final Stores is far from a foolproof plan for Apollo, considering its $1.4 billion buyout of Fresh Market in 2016 has underwhelmed investors. Further, Smart & Final will face increasing competition from rivals Walmart and Dollar General and e-commerce firms such as Amazon, which acquired Whole Foods Market in 2017.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Daniel Miller has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon. The Motley Fool has a disclosure policy.