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Last Updated ( Wednesday, 10 July 2013 14:50 )
DATE_FORMAT_LC2=Wednesday,July 10 2013 12:00:00 am EDT   
Kroger to Purchase Harris Teeter in $2.5 Billion Transaction

HarrisTeeterPhoto courtesy of Wikimedia CommonsCincinnati and Matthews, N.C. — The Kroger Co. (NYSE: KR) and Harris Teeter Supermarkets Inc. (NYSE: HTSI) have signed a definitive merger agreement whereby Kroger will purchase all outstanding shares of Harris Teeter for $49.38 per share in cash. The transaction is valued at $2.5 billion.

"We are excited to welcome Harris Teeter to the Kroger family," says David Dillon, chairman and CEO of Kroger. "Harris Teeter is an exceptional company with a great brand, friendly and talented associates, and attractive store formats in vibrant markets run by a first-class management team. This is a financially and strategically compelling transaction and a unique opportunity for our shareholders and associates. We look forward to bringing together the best of Kroger and Harris Teeter while continuing to operate and grow the Harris Teeter brands."

Together, the companies will operate 2,631 supermarkets and employ more than 368,300 employees across 34 states and Washington, D.C. Harris Teeter will continue to operate its stores as a subsidiary of The Kroger Co. and will retain its senior management team to lead the company. There are no plans to close stores and employees will continue to have job opportunities with both companies.

Kroger will retain a base of 212 Harris Teeter stores, which are primarily located in high-growth markets, vacation destinations and university communities in North Carolina, Virginia, South Carolina, Maryland, Tennessee, Delaware, Florida, Georgia and Washington, D.C. Of the 212 stores, 147 include a pharmacy.

Harris Teeter also operates distribution centers for grocery, frozen and perishable foods in Greensboro, N.C., and Indian Trail, N.C., as well as a dairy facility in High Point, N.C. Harris Teeter had revenues of approximately $4.5 billion in fiscal year 2012.

"Harris Teeter has a long track record of creating shareholder value and this merger is the culmination of those efforts over many years,” says Thomas Dickson, chairman of the board and CEO of Harris Teeter. “As part of Kroger, Harris Teeter will be well equipped to continue to provide our customers outstanding quality and customer service as well as excellent value in an increasingly competitive market."

Kroger will finance the transaction with debt and will assume Harris Teeter’s outstanding debt of approximately $100 million. The company plans to continue its quarterly dividend and share repurchase program. Additionally, Kroger plans to achieve annual cost savings of approximately $40 million to $50 million during the next three to four years.

Bank of America Merrill Lynch is acting as the exclusive financial advisor to Kroger, and Arnold & Porter LP is acting as Kroger’s legal advisor. J.P. Morgan Securities is Harris Teeter’s exclusive financial advisor, and McGuireWoods LLP is Harris Teeter’s legal advisor.

The boards of directors for both companies approved the terms of the agreement. Kroger will keep its headquarters in Cincinnati and Harris Teeter’s headquarters will remain in Matthews, a southern suburb of Charlotte.

The Kroger Co. operates under two dozen local banner names, including Kroger, City Market, Dillons, Jay C, Food 4 Less, Fred Meyer, Fry's, King Soopers, QFC, Ralphs and Smith's. The Kroger Co.’s stock price closed at $37.15 per share on Tuesday, up from trading at $22.58 per share this time last year.

Harris Teeter Supermarket Inc.’s stock price closed at $49.26 per share on Tuesday, up from trading at $40.76 per share this time last year.

— John Nelson



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