The Fresh Market, an upscale grocery chain with locations in the Chicago suburbs, has agreed to be bought by private equity firm Apollo Global Management for about $1.36 billion, the two companies said Monday.

The Greensboro, N.C.-based company, known for high-quality produce, meat and prepared foods, has faced increasingly stiff competition, particularly in markets like Chicago where consumers have numerous options for similar offerings — many of them cheaper. The deal, expected to close in the second quarter, comes after speculation last month that Kroger was seeking to buy The Fresh Market.

“Grocery retailers are consolidating because they need to bulk up to gain leverage,” said Michelle Malison, an analyst with Euromonitor International, in an email Monday. “Competition in the grocery space is fierce, and even high-end retailers that offer specialty and organics offerings such as Whole Foods and The Fresh Market are not immune to this.”

The Fresh Market announced in October it was conducting a financial review that could lead to the sale of the company. The grocery retailer has 186 stores throughout the country, including Illinois locations in Lake Forest, Wilmette, Crystal Lake, Geneva, Glen Ellyn, Lincolnshire, Kildeer, Peoria and Normal.

For the 13-week period ending Oct. 25, sales at stores open at least 15 months were down 3.7 percent, compared with an increase of 3.3 percent in the same period a year ago, according to The Fresh Market’s third quarter filings in November — the most recent available.

Malison said Apollo has experience at taking grocery retailers “that are already doing pretty well and improving them” through boosting sales, increasing efficiency and driving down prices, she said.

“The name of the game in grocery now is to scale in order to drive prices down — even in the high-end space, because it has become more competitive with Wal-Mart and Target in the organics space, and especially with Whole Foods 365 launching,” Malison said.

“We are excited about this transaction with Apollo, which recognizes the value of The Fresh Market’s strong brand and significant growth prospects while providing stockholders with an immediate and substantial premium,” said Rick Anicetti, The Fresh Market’s president and CEO in a statement.

Apollo said Monday that it is paying $28.50 for each share of The Fresh Market, a 24 percent premium to the stock’s closing price of $22.98 on Friday. Apollo’s holdings include Twinkie maker Hostess and the Chuck E. Cheese restaurants. Apollo is based in New York.

Shares of The Fresh Market shares soared $5.41, about 24 percent, closing at $28.39 in Monday trading.

Source: Chicago Tribune