Combined companies would generate $3B in annual sales
Bodega Latina Corp., operator of the El Super chain, has agreed to acquire Fiesta Mart, the Houston-based banner with 63 supermarkets in Texas.
The companies did not disclose terms, but the acquisition is valued at about $300 million, according to a report in the Wall Street Journal.
The purchase gives Bodega Latina, which is a division of Mexico’s Grupo Comercial Chedraui, 122 stores and revenues of about $3 billion, according to Bodega Latina. It will operate supermarkets in California, Arizona, New Mexico, Nevada and Texas.
Fiesta Mart will continue to operate under its current banner, the companies said.
“The acquisition of Fiesta allows us to meaningfully expand into Texas via an established, well known supermarket operator,” said Carlos Smith, president and CEO of Bodega Latina, in a statement. “Through the combination of the strengths of our two organizations, we will be well positioned to significantly accelerate our vision of efficiently offering high quality products at the lowest possible prices.”
Bodega Latina Corp. had estimated sales of about $1.4 billion in 2017, according to Supermarket News’ most recent Top 75 report. Its projected sales of $3 billion would put it ahead of Santa Fe Springs, Calif.-based Superior Grocers, which currently the largest Hispanic-focused chain in the U.S. with sales of about $1.75 billion.
Chedraui said it planned to continue to expand in the U.S. “both organically and through acquisition.”
Fiesta Mart, which operates stores in the Dallas-Fort Worth, Houston and Austin markets, had been acquired from family ownership in 2015 by Acon Investments. Last year it named Sid Keswani, a veteran of Target Corp., as its CEO.
“Combining the strengths of Bodega Latina with those of Fiesta will accelerate the evolution and growth of Fiesta through combining the parties’ scale, geographic reach, talented teams, and market knowledge,” Keswani said in a statement.
A spokeswoman for Bodega Latina Corp. said the company was not commenting further at this time.
Burt Flickinger, managing partner at New York-based consulting firm Strategic Resource Group, said Fiesta had been struggling to compete in the market lately amid intense pricing competition driven by the expansion of discounters Winco and Aldi in the region.
“This was a proverbial Hail Mary save for all of the great workers in the stores and the other people who have given their lives to the company,” he said.
Flickinger noted that among the many recent distressed retail company sales, Fiesta Mart is the only one in which 100% of the store locations, assets and inventory were included in the transaction.
The purchase price amounts to “a steal” for Bodega Latina, he said.
“Carlos Smith is essentially getting a buy-one, get-one free deal for all of the stores,” said Flickinger, who estimated that it would have cost between $9 million and $15 million per store for Bodega Latina to expand in the market through new construction.
Instead, the company is acquiring the existing Fiesta Marts for about $4.5 million per store.
Although Fiesta Mart has lost some of its luster in the market, Flickinger said, Bodega Latina should be able to build the stores back up with a focus on strong perishables, including family packs of meat, and sharp pricing, both which El Super is known for.
“This was a brilliant strategic move for Carlos Smith,” Flickinger said. “This way he can double the size of his company and [expand] outside of Southern California. Now he gets one of the finest chains in Texas — albeit badly broken — which will make El Super one of the power players in North America among food retailers serving Spanish-speaking consumers.”
The transaction is expected to close at the beginning of the second quarter. RBC Capital Markets was the exclusive financial advisor and Sidley Austin was legal advisor to Bodega Latina, respectively. The Food Partners was the exclusive financial advisor and Hogan Lovells U.S. was legal advisor to Fiesta, respectively.
The acquisition comes amid ongoing expansion among Hispanic operators in the U.S. It also follows the merger last year of Ontario, Calif.-based Cardenas Markets and Mi Pueblo, after both companies had been acquired in 2016 by investment firms KKR and Victory Park Capital.
