The Kroger Co (NYSE: KR) and Harris Teeter Supermarkets Inc (NYSE: HTSI) announced a definitive merger agreement under which Kroger will purchase all outstanding shares of Harris Teeter for $49.38 per share in cash.
The transaction price represents a premium of 33.7% to the Harris Teeter closing share price January 18, 2013, the day of the first media report that Harris Teeter was evaluating strategic alternatives. Terms of the agreement were approved by the boards of directors of both companies.
Headquartered in Matthews NC, Harris Teeter brings to Kroger a complementary base of 212 stores in southeastern and mid-Atlantic markets and in Washington DC. Haris Teeter also operatesdistribution centers for grocery, frozen, and perishable foods in Greensboro NC and Indian Trail NC and a dairy facility in High Point NC. It had revenues of about $4.5 billion for fiscal year 2012.
Kroger will finance this transaction with debt and intends to assume Harris Teeter’s outstanding debt of approximately $100 million.
Kroger expects to achieve annual cost savings of approximately $40 to $50 million over the next three to four years. Much of the savings is expected to come from the benefits of Kroger’s scale.
The combined company will operate 2,631 supermarkets and employ more than 368,300 associates across 34 states and the District of Columbia. After closing, Harris Teeter will continue to operate its stores as a subsidiary of Kroger and will continue to be led by members of Harris Teeter’s senior management team. There are no plans to close stores, and associates will continue to have employment opportunities with both companies. Kroger headquarters will remain in Cincinnati OH, and Harris Teeter will keep its headquarters in Matthews.
The merger is expected to close after satisfaction of customary closing conditions including approval by Harris Teeter shareholders and regulatory approval.
