Deals of the YEar awards
In 2022, Chilean retailer Cencosud undertook a bold acquisition that made it a relevant player in the US market.
The deal, which closed in May and which wins the award for Cross Border M&A Deal of the Year, saw the company spend $676 million to acquire a 67% stake in The Fresh Market (TFM), a supermarket chain specialized in premium and fresh food items.
Funded via Cencosud’s own resources and a $300 million, 12-month loan, the acquisition added 160 stores to the group’s portfolio. Now, in addition to Brazil, Argentina, Peru, Colombia and Chile, it has a presence in 22 US states, too.
Matías Videla, Cencosud’s CEO, says that the decision to buy TFM is part of a strategy to diversify the group’s activities while maintaining a focus on the supermarket business.
Furthermore, its US presence enables Cencosud to have easier access to the liquidity of the US capital markets. Its partners who own the remaining 33% of capital, including asset managers Apollo, bring significant experience to the table.
“The decision to acquire 67% of TFM, and not 100%, was mainly due to the goal of keeping Apollo as a strategic partner, considering its vast knowledge and experience in the US retail market,” Videla says. “Together we can seek ways to deploy the company’s full potential via a new capital structure.”
TFM reported revenues of $1.93 billion in 2021, with an adjusted EBITDA of $196 million. Cencosud estimates that around 12% of its revenues will now come from the US market thanks to the acquisition.
But TFM will also help the company keep up with the latest trends in the US grocery sector while introducing new ideas and products into their main Latin American businesses.
“The development and the quality of products offered in a market like the US provides a wealth of opportunities to enhance our product range in Latin American countries,” Videla says. “The development of our own brands and of lines of products such as ‘ready to eat’ and ‘ready to cook’ items is another competitive advantage that we want to implement in South America.”
TFM’s technological platform should also help Cencosud grow its weight in the region’s e-grocery sector, he says. LF
Financial Advisor to The Fresh Market: Credit Suisse
Financial Advisor to Cencosud: J.P. Morgan
Legal Advisor to The Fresh Market: Simpson Thacher
Legal Advisor to Cencosud: Milbank
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