Kroger Buys Harris Teeter For $2.5 Billion

The Kroger Company is expanding more than its natural, organic beverage options. It’s also expanding its already massive footprint, moving more heavily into the southeast and mid-Atlantic markets via acquisition.

Kroger and Harris Teeter Supermarkets, Inc. announced on Tuesday morning an agreement that will allow Kroger to purchase all outstanding shares of Harris Teeter for $49.38 per share, according to a joint release.

In a conference call Tuesday morning, Mike Schlotman, Kroger’s senior vice president and CFO, approximated the value of the purchase at $2.5 billion.

“This is a financially and strategically compelling transaction and a unique opportunity for our shareholders and associates,” David B. Dillon, Kroger’s chairman and CEO, said in the release.

Harris Teeter, which had revenues of approximately $4.5 billion in 2012, provides Kroger with its 212 stores in southeastern and mid-Atlantic markets, including Washington D.C., in what the companies have identified as high-growth markets, vacation destinations and university communities. Harris Teeter also operates distribution centers for grocery, frozen and perishable foods in Greensboro, N.C., and Indian Trail, N.C., and a dairy facility in High Point, N.C.

“Their store footprint is highly complementary to Kroger’s,” Schlotman said. “They share our consumer-centric approach to everything we do — from store format and merchandising to disciplined execution across the organization.”

Schlotman also said that Kroger has long respected Harris Teeter for its customer orientation, friendly and professional people, strong management team, clean, well-merchandised stores, and positive company culture and values.

Kroger, which will finance the transaction by selling bonds, intends to inherit Harris Teeter’s current debt of approximately $100 million and expects annual cost savings of approximately $40 to $50 million over the next three to four years.

As a joint enterprise, the company will operate 2,631 supermarkets and employ more than 368,300 associates across 34 states and Washington D.C.

“We see a lot of opportunity to learn from one another,” Schlotman said, “and many ways that our combination will benefit each organization.”