Kroger announced Tuesday that it is buying Harris Teeter Supermarkets in a $2.5 billion deal. The deal will be the fourth-largest acquisition of a North American food retailer in the past decade. It also would be Kroger’s biggest takeover since 1998, when it bought the Fred Meyer food and merchandise store chain in the Northwest for more than $12 billion, according to financial data service Bloomberg. The move must be approved by federal regulators.
Kroger has 2,419 stores in 31 states. In addition to its flagship brand of supermarkets, it operates under a number of brands, including Ralphs, Fry’s, King Soopers and Food 4 Less. Harris Teeter has 212 stores in what Kroger called attractive, high-growth markets in the eight Southeast and Mid-Atlantic states and Washington, D.C., and about $4.5 billion in revenue for fiscal 2012.
Together, the companies will employ more than 368,300 people in 34 states and Washington, D.C.
Kroger is No. 2 only to Wal-Mart in U.S. retail sales, bigger than Target, Home Depot, and CVS. It also is more than a grocery store chain, with a growing number of supercenter-style merchandise and food stores, including the Fred Meyer chain in the Northwest and its Marketplace stores under several of its brands.
Kroger remains based in Cincinnati, where the company was founded in the 19th century. Harris Teeter will keep its headquarters in Matthews, North Carolina.
Kroger will pay $49.38 each for Harris Teeter shares, about 2 percent above their Monday close and 33.7 percent higher than the January 18 closing price, when the company disclosed it was evaluating strategic alternatives. Kroger said that it does not plan to close any Harris Teeter locations. Harris Teeter management will continue to operate the stores as a subsidiary of Kroger, which will then have 9 percent market share nationwide.
Kroger says it expects the deal to result in cost savings of $40 million to $50 million in the next three to four years. It will finance the deal with debt and plans to assume Harris Teeter’s outstanding debt of about $100 million.
