Sprouts Farmers Market LLC, the grocery-store operator that’s owned by Apollo Global Management LLC (APO:US), is considering an initial public offering, three people familiar with the matter said.
The Phoenix-based company may begin interviewing underwriters for an IPO soon, said one of the people, who asked not to be named because the discussions are private.
Sprouts, originally a family-owned chain, has expanded after Apollo combined the company with another business owned by the same family in a February 2011 buyout. Sprouts completed an acquisition of 35 Sunflower Farmers Market locations in May.
Apollo is exploring a Sprouts offering after the largest U.S. IPOs by private equity-backed companies have made money for investors. Apollo- and Texas Pacific Group Ltd.-backed Norwegian Cruise Line Holdings Ltd. surged 47 percent through yesterday since raising $514.1 million in an IPO last month; Starwood Capital Group LLC’s Tri Pointe Homes Inc. has gained almost 7 percent since a $267.6 million IPO, and Bain Capital Partners LLC-backed Bright Horizons Family Solutions Inc. has risen 25 percent since a $222.2 million initial offer.
Charles Zehren, a spokesman for New York-based Apollo at Rubenstein Associates, declined to comment.
Sprouts, which has about 150 locations in the U.S. Southwest, is planning to open as many as 20 stores this year. While the grocery chain traces its roots to a San Diego fruit stand in 1943, the first Sprouts Farmers Market opened in Chandler, Arizona, in 2002, under the leadership of Stan and Shon Boney, according to the company’s website.
Sprouts brings in about $2 billion in revenue annually and $150 million a year in earnings before interest, taxes, depreciation and amortization, said a person familiar with the company’s financial performance. A stock offering could value the company at about $2 billion, the person said.
U.S. grocery-store sales are projected to be relatively stagnant for the next four years, according to a June 2012 report from researcher IBISWorld Inc. Revenue in the industry is forecast to increase 0.4 percent a year, on average, and reach about $501 billion in 2017, the report shows. Kroger Co (KR:US)., based in Cincinnati, is the largest U.S. grocery chain, followed by Safeway Inc.
Kroger shares (KR:US) gained 7.4 percent last year, while the Standard & Poor’s 500 Index rose 13 percent. Pleasanton, California-based Safeway fell 14 percent.
Whole Foods Market Inc (WFM:US)., the largest natural-foods chain in the U.S., jumped 31 percent in 2012 as it added locations and lured customers with organic produce and naturally raised meats. Austin, Texas-based Whole Foods has about 340 locations.
IPOs are getting a boost from a rally in stocks, after the Dow Jones Industrial Average capped its best January since 1994, advancing 5.8 percent. Of the 13 U.S. IPOs so far this year, 10 are trading above their offer price, data compiled by Bloomberg show.
Sprouts stores, which are mostly in Arizona, California, Colorado and Texas, sell food including all-natural cage-free chicken, Australian-style yogurt and dried grains and beans in its bulk department.
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