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Harris Teeter, Kroger complete $2.5B merger

29 January 2014

Jennifer Thomas, Charlotte Business Journal

Harris Teeter Supermarkets Inc. (NYSE:HTSI) is now a subsidiary of The Kroger Co.

The $2.5 billion merger between the grocery chains was completed on Tuesday. Under the merger agreement, Harris Teeter shareholders will receive $49.38 per share of Harris Teeter common stock.

Shares of Harris Teeter stock ceased trading on the New York Stock Exchange on Tuesday.

Cincinnati-based Kroger announced in July that it would acquire Harris Teeter in a deal valued at $2.5 billion, including assumption of debt.

Harris Teeter will keep its name, brands, and Matthews headquarters. It will operate as a Kroger subsidiary under the direction of current Harris Teeter President Fred Morganthall.

"We'll keep everything about Harris Teeter that has made it great," says Keith Dailey, Kroger spokesman. "Over time, we think customers will only see us get better at delivering fresh, high-quality foods and an exceptional shopping experience. The success we've had with mergers over the years is because we both contribute to the whole."

The deal will benefit Kroger (NYSE:KR) and Harris Teeter customers, associates and shareholders, says W. Rodney McMullen, chief executive of Kroger.

"This merger brings the exceptional Harris Teeter brand and a complementary base of stores in attractive markets to the Kroger family,” McMullen says. “We have long respected Harris Teeter's customer orientation, friendly and professional associates, strong management team, and company values – which are consistent with ours.”

Kroger financed the transaction through a combination of debt issued in December and commercial paper. The grocery chain expects net accretion to earnings per diluted share in the range of 6 cents to 9 cents in the first full year after the merger, excluding transition and transaction expenses.

Kroger also expects to achieve cost savings of approximately $40 million to $50 million, largely from the benefits of Kroger's enhanced scale, within the next four years.

"Kroger has a strong history of working to achieve integration and synergy goals, which set the stage for long-term growth," Dailey says.

Matthews-based Harris Teeter operates 227 stores in eight states and Washington, D.C. It also has distribution centers for grocery, frozen and perishable foods in Greensboro and Indian Trail and a dairy facility in High Point.

The grocery chain had revenue of $4.7 billion for fiscal 2013. It has roughly 25,000 employees.

“The merger with Kroger provides the opportunity to continue to expand the Harris Teeter brand as well as to provide future employment and career advancement opportunities for our associates in an increasingly competitive market,” says Thomas Dickson, outgoing Harris Teeter chairman and CEO.

Dickson will retire as part of the merger. Kroger also announced that John Woodlief, executive vice president and chief financial officer, will resign.

In total, Kroger will now operate 2,641 supermarkets and employ more than 368,000 people across 34 states and the District of Columbia. It operates those stores under more than two dozen banners, including Kroger, City Market, Dillons, Food 4 Less, Fred Meyer, Fry's, Harris Teeter, Jay C, King Soopers, QFC, Ralphs and Smith's.


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