The Kroger Co. (NYSE: KR) today announced that it would acquire supermarket chain Harris Teeter Supermarkets Inc. (NYSE: HTSI) for $49.38 a share in cash, or about $2.5 billion. The price represents a premium of 33.7% to Harris Teeter’s closing price on January 18 of this year, the first day that reports surfaced that the company might be looking to be acquired.
Kroger gains 212 stores in Washington, D.C., the Mid-Atlantic states and the southeast in what the company’s press release calls “high-growth markets, vacation destinations, and university communities.”
The acquisition will be financed with debt and includes Kroger’s assumption of $100 million existing debt at Harris Teeter. Kroger expects the acquisition to add $0.06 to $0.09 to earnings in the first full year after the merger is completed. The company also said it expects to see cost savings of $40 million to $50 million in the next three or four years based on its beefed-up scale. Kroger notes its “strong history of achieving synergy goals. Being patient in achieving those goals reduces the risk of the transaction and sets the stage for sustainable growth.”
Shares of Harris Teeter are up about 2% in premarket trading this morning, at $49.49, which is above the top of its current 52-week range of $35.25 to $48.96.
Kroger’s shares are inactive this morning, having closed last night at $36.19 after posting a new 52-week high yesterday. The stock’s 52-week range is $20.98 to $36.29.
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