What is in this article?:
- Harris Teeter Eyes Sale
- 'Strong Retail Food Franchise'
“In the case of Harris Teeter, you have a very strong retail food franchise, and I think it would go in a range of six to eight times EBITDA.”
— Chuck Cerankosky, analyst, Northcoast Research
MATTHEWS, N.C. — Harris Teeter Supermarkets last week said it had received an offer to acquire the company from two private equity firms and had subsequently engaged J.P. Morgan to evaluate its strategic alternatives.
A potential auction of the 200-store chain — considered to be one of the best conventional supermarket operators in the country — could generate between $2 billion and $2.5 billion and attract the attention of numerous additional suitors, observers said last week.
“The company was approached by two private equity firms who expressed an interest in purchasing the company,” Harris Teeter said in a statement. “In order to fulfill its duty to its shareholders to evaluate opportunities to increase shareholder value, the company retained J.P. Morgan to assist it in conducting discussions with certain highly qualified parties.”
Harris Teeter did not identify the private equity groups that offered to buy the chain and said it would continue to pursue its ongoing program to build new stores and operate all of its facilities as usual during the review. The company also stressed that a deal may not result from the discussions.
Sources told SN last week they expected Harris Teeter would have little problem attracting potential acquirers. They cited the chain’s reputation for fresh presentation and quality, strong market share and sales growth, and advantages including private-label development, self-distribution and a non-union workforce.
For a company like Lakeland, Fla.-based Publix Super Markets — which recently established a new division in Charlotte to facilitate expansion into Harris Teeter’s North Carolina hotbed — Harris Teeter would allow for a dramatic expansion without needing to build its way north. But a company spokeswoman last week told SN the retailer was not in discussions with Harris Teeter and typically does not grow by acquisition.
Several sources also said Kroger and Ahold would likely have interest. Kroger, based in Cincinnati, has been reticent to do large acquisitions, in part because costs to invest in price and labor necessary to bring a new chain to its standards make deals too expensive. But Kroger would have less such concerns with Harris Teeter, Karen Short, an analyst at BMO Capital, told SN.
Sources said Ahold would also take a look, noting that company’s Giant-Carlisle division in 2009 won bidding for Ukrop’s Super Markets, the Richmond, Va.-chain with a positioning similar to Harris Teeter.