Kroger to buy Harris Teeter for $2.44 billion
The sale shouldn’t affect Kroger’s mid-Atlantic office in Roanoke or its Salem distribution center.
Wednesday, July 10, 2013
NEW YORK — Kroger, the country’s largest traditional supermarket operator, said Tuesday that it has agreed to buy Harris Teeter Supermarkets Inc. for about $2.44 billion in cash, boosting its presence in key southeastern and mid-Atlantic markets.
Under the terms of the agreement, Cincinnati-based Kroger will pay $49.38 for each of the supermarket chain’s shares. The price represents a 2 percent increase over the company’s Monday closing stock price.
“This is a financially and strategically compelling transaction and a unique opportunity for our shareholders and associates,” Kroger Chairman and CEO David Dillon said in a statement.
The deal has been approved by both companies’ boards, but remains subject to Harris Teeter shareholder approval. Harris Teeter announced in February that it was exploring strategic alternatives, including a possible sale.
Harris Teeter operates 212 stores in eight southeastern and mid-Atlantic states and Washington D.C., along with a pair of distribution centers and a dairy facility in North Carolina. Its fiscal 2012 revenue totaled about $4.5 billion.
In comparison, Kroger operates 2,419 stores in 31 states. In addition to its flagship brand of supermarkets, it also owns Ralphs, Fry’s, Food 4 Less and other brands. The acquisition adds another three states to its store footprint.
Harris Teeter pulled out of Western Virginia in 1999, when its two stores in Roanoke, one in Blacksburg and six others nearby became Kroger locations as part of a store swap between the two companies.
In a conference call with investors, Michael Schlotman, who is Kroger’s chief financial officer, said the deal marks Kroger’s entry into several attractive, high-growth markets such as Charlotte, N.C., and Washington D.C.
After the deal closes, Harris Teeter will become a Kroger subsidiary and will continue to be led by members of its current senior management. There are no plans to close stores and the division will remain based in Matthews, N.C.
The sale should not have an impact on Kroger’s mid-Atlantic office in Roanoke or its Salem distribution center because Harris Teeter will continue to operate as it has, said Carl York, a spokesman for Kroger’s mid-Atlantic region.
York said the placement of Harris Teeter stores is a good fit with the location of Kroger stores, but noted that some markets have both stores in the same area. He said it’s too early to say whether some stores in proximity to each other will close. He also couldn’t say whether a Harris Teeter will open in the Roanoke area. The closest Harris Teeter stores to Roanoke are in Charlottesville and Greensboro, N.C.
“We merged because it’s a good fit with each other,” York said. “They are a great company and very well respected. We look forward to learning from each other.”
Kroger Co. says it expects the deal to result in cost savings of $40 million to $50 million over the next three to four years. It will finance the deal with debt and plans to assume Harris Teeter’s outstanding debt of about $100 million.
Roanoke Times staff writer Amanda Codispoti contributed to this report.
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THE ROANOKE TIMES
