Kroger Buying Harris Teeter for $2.4B

CHARLOTTE, NC—The Kroger Co. is acquiring Harris Teeter for $2.4 billion, or $49.38 per share. The price marks a 33.7% premium to Harris' closing share price on Jan. 18, the day of the first media report that the grocery store brand was evaluating strategic alternatives. The boards of both companies have approved the deal.

David B. Dillon, Kroger's chairman and CEO, called Harris 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. As Dillon sees it, Harris shares Kroger's customer-centric approach, from store format and merchandising to loyalty programs. Post-merger, Kroger will operate 2,631 supermarkets and employ more than 368,300 associates across 34 states and the District of Columbia.

“This is a financially and strategically compelling transaction and a unique opportunity for our shareholders and associates,” Dillon says. “We look forward to bringing together the best of Kroger and Harris Teeter while continuing to operate and grow the Harris Teeter brands. Together, we can continue to deepen our connections with customers across all of our markets."

Harris adds 212 stores in southeastern and mid-Atlantic markets and in Washington, D.C. to the Kroger brand. The stores are located primarily in high-growth markets, vacation destinations, and university communities in North Carolina, Virginia, South Carolina, Maryland, Tennessee, Delaware, Florida, Georgia and the District of Columbia.

Harris also operates distribution centers for grocery, frozen and perishable foods in Greensboro, NC and Indian Trail, NC and a dairy facility in High Point, NC.  Harris posted revenues of about $4.5 billion for 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 W. Dickson, chairman and CEO of Harris. Harris will maintain its corporate branding, management teams, store growth plan, distribution and manufacturing facilities in North Carolina, and headquarters in Matthews, NC.  

Kroger will finance the transaction with debt. Kroger also intends to assume Harris outstanding debt of about $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.