Apollo seeks sale of Smart & Final's food warehouse stores -sources

(Reuters) - Private equity firm Apollo Global Management Inc APO.N is exploring a sale of the warehouse store business of Smart & Final Stores LLC, the U.S. food retailer it acquired in June, people familiar with the matter said on Friday.

Apollo is seeking more than $1 billion for the business, close to the price tag of $1.1 billion, including debt, it paid for the entirety of Smart & Final six months ago, the sources said. The sale would exclude Smart & Final’s discount grocery store business, which is less lucrative, the sources added.

Apollo has hired Credit Suisse Group AG CSGN.S and Deutsche Bank AG DBKGn.DE to run an auction for the division, Smart & Final Foodservice, which has about 70 warehouse stores, according to the sources.

The New York-based buyout firm hopes the business, which has 12-month earnings before interest, taxes, depreciation and amortization of more than $80 million, will attract the acquisition interest of major food retailers and distributors, the persons said.

The sources asked not to be identified because the matter is confidential. Apollo, Credit Suisse and Smart & Final declined to comment, while Deutsche Bank did not respond to a request for comment.

Based in Commerce, California, Smart & Final faces competition from direct rivals as well as e-commerce firms such as Inc AMZN.N, which acquired grocery chain Whole Foods Market Inc for $13.7 billion in 2017.

Among Smart & Final's brick-and-mortar competitors are deep-pocketed international entrants to the U.S. market such as Lidl and Ahold Delhaize, as well as discount retailers such as Walmart Inc WMT.N and Dollar General Corp DG.N.

The Smart & Final Foodservice stores sell goods in a no-frills warehouse format to other food businesses such as restaurants and caterers. The remaining business, Smart & Final Grocers, allows consumers to shop for food at a discount without a membership fee at about 255 stores, according to the company’s website.

Smart & Final’s stores operate in California, Oregon, Washington, Arizona, Nevada, Idaho, Utah and Montana, with additional stores in Northern Mexico operated through a joint venture.

Reporting by Joshua Franklin and Greg Roumeliotis in New York; Editing by Matthew Lewis