Sprouts Farmers Market (SFM), the Phoenix-based operator of grocery stores that offer fresh, natural, and organic food at competitive prices, reported its fiscal fourth quarter results before the open on February 23. They weren't well received. SFM dropped 8% over the ensuing eight sessions. Last week, however, was a much better story for the stock, which surged 23% on vague M&A rumors.
Some of that vagueness is being done away with this morning following a Bloomberg.com article suggesting grocery-chain operator Albertsons, which bought Safeway in 2014, has held preliminary talks with Sprouts Farmers Market about a merger. Bloomberg.com cited "people with knowledge of the matter" as its source.
Albertsons is controlled by private equity firm Cerberus Capital Management, which has had designs reportedly on bringing Albertsons public again.
The interest in Sprouts Farmers Market makes sense given the growing popularity of healthy eating. Having a subsidiary that caters to customers seeking natural and organic food would provide a nice complement to the traditional grocery store channel.
Sprouts Farmers Market stores are located predominately in the southwestern part of the United States. California is its biggest market with 96 stores as of January 1, 2017, although Sprouts Farmers Market is starting to expand in the southeast with 20 stores combined in Tennessee, Alabama, and Georgia, and plans to increase its footprint in Florida and North Carolina.
The article from Bloomberg.com discussing Albertsons's interest in Sprouts Farmers Market was out on Sunday and it has helped lift shares of SFM, which has a $3.0 billion market capitalization, another 7% in pre-market action.
Larger rival Whole Foods Market (WFM), which sports a $9.4 billion market capitalization, is up 2% in a related trade.