Ahold NV and Publix Supermarkets Inc. are among the companies reportedly considering bids for Harris Teeter Supermarkets Inc.

Ahold NV, Publix Supermarkets Inc., Harris Teeter Supermarkets Inc., Ahold, Publix, Harris Teeter, BMO Capital Markets, analyst, Karen Short, J.P. Morgan Securities LLC, Dick Boer, ICA, Giant/Landover, A&P, Pathmark Stores Inc.

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Inside This Issue - News

Two chains eye bid for Harris Teeter

March 11th, 2013

MATTHEWS, N.C. – Ahold NV and Publix Supermarkets Inc. are among the companies reportedly considering bids for Harris Teeter Supermarkets Inc.

First-round bids for the company are not due until later this month, and so far neither Ahold nor Publix have made offers for Harris Teeter, which has a market value of more than $2 billion.

Harris Teeter operates more than 200 stores in North Carolina, South Carolina, Virginia, Georgia, Tennessee, Maryland, Delaware, Florida and ­Washington, D.C.

For Publix, the acquisition would provide an opportunity to expand into North Carolina and Virginia BMO Capital Markets analyst Karen Short contended in a research note that Publix’ balance sheet is solid enough to let it finance a deal. Less clear is whether it would be willing to pay enough of a premium to close the deal.

"Publix rarely makes acquisitions, and valuation could be a hurdle," Short wrote.
Harris Teeter could sell at a premium if multiple parties are interested in acquiring it, as seems to be the case.

The company announced last month that it had retained J.P. Morgan Securities LLC to help it explore two recent offers from private equity firms.

Ahold is considered another serious suitor, according to Short and other analysts. And although the company has not commented on rumors that it has approached Harris Teeter about a deal, it has confirmed that it is open to the possibility of an acquisition.

"We have the opportunity as a company to build on the capabilities we have to grow our business from an organic point of view as well as from an acquisition point of view," Ahold chief executive officer Dick Boer told the Bloomberg news service recently. "I don’t exclude any possibility on how we look at growth."

Ahold has the cash available for a deal, analysts say, particularly given the $3.1 billion in proceeds the company received from the sale of its 60% stake in Swedish retailer ICA.

Buying Harris Teeter would help Ahold expand further in Washington, D.C., where its Giant/Landover chain already has a strong presence, and in the southern part of the United States.

Harris Teeter, which was cofounded by two North Carolina grocers in 1960, is expected to sell at a premium price. Bloomberg cites estimates that bids for the company would come in at about $55 a share, which would be 9.3 times earnings before interest, taxes, depreciation and amortization; the news service points out that would be the steepest multiple for a supermarket acquisition deal since A&P purchased Pathmark Stores Inc. in 2007 and paid 9.9 times EBITDA.

Harris Teeter is seen to be worth the price, because it is a strong regional chain with a good reputation, a solid management team and a loyal customer base, analysts say. And the company has said there is no certainty it will accept a deal.