Kroger to buy Harris Teeter Supermarkets in $2.5 billion deal

Reuters

Kroger Co , the biggest U.S. supermarket operator, said it would acquire Harris Teeter Supermarkets Inc in a deal valued at $2.5 billion to expand in the south east and mid-Atlantic regions.

The company offered $49.38 per share in cash, representing a premium of 1.8 percent to Harris Teeter's Monday close. The stock has run up 31 percent since January 18, when the first reports emerged that the company was up for sale.

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Reuters reported in February that Kroger was among the likely suitors.

Kroger said it expects the deal to add 6 to 9 cents to its earnings per share in the first full year after close, excluding transition and transaction expenses.

The 130-year-old Kroger, which owns the Ralphs, Smith's and Food 4 Less chains as well as its namesake stores, said it would assume about $100 million of Harris Teeter's debt.

Harris Teeter, founded during the Great Depression, operates a chain of 212 supermarkets in North Carolina, Virginia, South Carolina, Maryland, Tennessee, Delaware, Florida, Georgia and the District of Columbia. It reported revenue of about $4.5 billion for 2012.

Kroger, which has more than 2,400 stores, reported revenue of $96.8 billion for the year ended February 2.

BofA Merrill Lynch is Kroger's financial adviser, while Arnold & Porter LLP is the legal adviser.

J.P. Morgan Securities is the financial adviser to Harris Teeter and McGuireWoods is the legal adviser.

Harris Teeter shares were up 1 percent at $48.89 in heavy premarket trading. Kroger shares were untraded after closing at $36.19 on Monday.

(Reporting by Siddharth Cavale in Bangalore; Editing by Saumyadeb Chakrabarty)