Kroger to acquire grocery chain Harris Teeter

Acquisition could mean lower prices for DC area grocery shoppers. Photo: AP/file

CINCINNATI — Good news for DC area grocery shoppers came from Ohio Tuesday. Kroger, the country’s largest traditional supermarket operator, said Tuesday that it is buying Harris Teeter Supermarkets Inc. for about $2.44 billion in cash.

“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.

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Indeed, the deal seems like a good one for both companies, expanding Cincinnati-based Kroger’s store base in the southeastern and mid-Atlantic markets and increasing the number of states it operates in by three to 34.

The win for Harris Teeter shoppers, on the other hand, could be noticeably lower prices due to the much larger Kroger buying and warehousing power. Kroger Co. says it expects the deal to result in cost savings for the combined companies of $40 million to $50 million over the next three to four years.

Under the terms of the agreement, Kroger will pay $49.38 for each of the fellow supermarket chain’s shares, a 2 percent increase over the company’s Monday closing stock price.

Both companies’ boards have approved the deal. Harris Teeter had announced in February that it was exploring strategic alternatives, including a possible sale.

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Harris Teeter operates 212 stores in eight southeastern and Mid-Atlantic States and Washington DC, 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 and Food 4 Less stores.

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 company will remain based in Matthews, N.C.

Markets seem to have a lot of love for this deal. In premarket trading, Harris Teeter shares edged up 47 cents to $48.99, while Kroger shares rose 46 cents to $36.65. Normally, due to costs and debt involved in such transactions, the acquiring company usually takes a hit to its stock price after such a transaction is announced.

    —AP contributed to this article.

Read more of Terry’s news and reviews at Curtain Up! in the Entertain Us neighborhood of the Washington Times Communities. For Terry’s investing and political insights, visit his Communities columns, The Prudent Man and Morning Market Maven, in Business.

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Terry Ponick

Now writing on investing, politics, music, movies and theater for the Washington Times Communities, Terry was formerly the longtime music and culture critic for the Washington Times print edition (1994-2009) before moving online with Communities in 2010.  



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