Kroger Co. and Harris Teeter Supermarkets Inc. have concluded a definitive merger agreement under which Kroger will acquire all outstanding shares of Harris Teeter stock for $49.38 per share in cash and the assumption of Harris Teeter’s outstanding debt.


Kroger Co., Harris Teeter Supermarkets, David Dillon, Matthews, N.C., Kroger, Harris Teeter












































































































































































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Retail News Breaks

Kroger to acquire Harris Teeter Supermarkets

July 9th, 2013

CINCINNATI – Kroger Co. and Harris Teeter Supermarkets Inc. have concluded a definitive merger agreement under which Kroger will acquire all outstanding shares of Harris Teeter stock for $49.38 per share in cash and the assumption of Harris Teeter’s outstanding debt.

The terms of the deal have been approved by the boards of directors of both companies.

The price represents a premium of 33.7% on the closing price of Harris Teeter shares as of January 18, when the company first reported that it was seeking a buyer. It is only 1.8% higher than Harris Teeter’s closing price of $48.52 on Monday, July 8, however, since the grocer’s share price has soared 31% since the January announcement. In addition, Kroger will assume around $100 million of Harris Teeter’s outstanding debt.

The combination gives Kroger an upscale chain of 212 stores located primarily in high-growth markets, including vacation destinations and university towns, in North Carolina, Virginia, South Carolina, Maryland, Tennessee, Delaware, Florida, Georgia and the District of Columbia. Kroger also gains distribution centers for grocery, frozen food and perishables in Greensboro, N.C., and Indian Trail, N.C.. as well as a dairy facility in High Point, N.C.

"We are excited to welcome Harris Teeter to the Kroger family," said David Dillon, Kroger’s chairman and chief executive officer. "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. They share our customer-centric approach to everything we do — from store format and merchandising to innovative loyalty programs. 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."

Following the closing of the deal, Harris Teeter will operate as a subsidiary of Kroger under the management of key members of Harris Teeter senior management. There are no plans to close stores, and the Harris Teeter headquarters in Matthews, N.C., will continue to operate.

In its 2012 fiscal year, which ended October 2, 2012, Harris Teeter reported earnings from continued operations of $99.9 million, or $2.04 per diluted share, on sales of $4.54 billion. Kroger expects the transaction to deliver net accretion to earnings of 6 cents to 9 cents per diluted share in the first full year after the merger, excluding transition and transaction expenses.

Kroger management further noted that it intends to continue its quarterly dividend and share repurchase program while managing its free cash flow to reduce the debt assumed to complete the Harris Teeter acquisition. The company expects to allocate some of its free cash to reestablish and maintain a net debt to EBITDA (earnings before interest, taxes, depreciation and amortization) ratio of 2.00 to 2.20 over the next 18 to 24 months.

In addition, over the next three to four years Kroger expects to achieve annual cost savings of $40 million to $50 million, largely due to its scale.

With the completion of the merger, Kroger will operate 2,631 supermarkets and multidepartment stores in 34 states and the District of Columbia.

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