CHARLOTTE, N.C. — Kroger Co. announced Tuesday that it has agreed to buy Harris Teeter Supermarkets Inc. in a $2.44 billion deal.
The sale gives Kroger a larger footprint in the Southeast, as well as adding to its already formidable bulk.
The combined company will operate 2,631 supermarkets and employ 368,300 workers in 34 states.
Kroger Co. owns the Fred Meyer chain, which has a large footprint in Oregon. Kroger bought Fred Meyer in 1999 for $13.5 billion.
The news came five months after Harris Teeter hired JPMorgan to help the company explore sales options.
Two private equity firms had expressed an interest in Harris Teeter, the grocer said at the time.
Harris Teeter operates stores in the Carolinas, Virginia, Maryland, Tennessee, Delaware, Florida, Georgia and the District of Columbia. The bulk of its stores — nearly two-thirds — are in North Carolina.
Kroger, based in Cincinnati, said Harris Teeter will maintain its headquarters in Matthews, N.C., and continue to operate its 212 grocery stores under the Harris Teeter name. But the company also said it expects to generate $40 million to $50 million worth of annual savings by combining the two companies.
The deal — approved unanimously by both boards of directors Monday — will add Harris Teeter's $4.5 billion in annual sales to Kroger's total, and will push Kroger past the $100 billion revenue mark.
"Harris Teeter has a long track record of creating shareholder value, and this merger is the culmination of those efforts over many years," Harris Teeter Chairman and CEO Thomas Dickson said in a statement.
Dickson said Harris Teeter will maintain much of its identity after the sale.
"We are excited about becoming part of the Kroger Co., one of the best food retailers in the U.S., while maintaining the Harris Teeter banner, our management teams, our new store growth plan, our distribution and manufacturing facilities in North Carolina, as well as our headquarters in Matthews," he said.
Kroger Chief Financial Officer Mike Schlotman told investors and analysts that Harris Teeter has a good brand name, and there's no reason to change it to Kroger.
Schlotman said the company doesn't expect to close any stores after the transaction closes. He said he couldn't give many details on how the combined company will achieve cost savings, however.
"At this point, it's a little premature to go into too much detail," he said. One area of potential savings is through private label products, Schlotman said.
"They're buying private label for 212 stores, and we're buying for 2,400 stores," he said.
One area in which the stores differ slightly is price. "If you looked at an average Kroger store, (Harris Teeter is) probably overall priced a little higher," Schlotman told analysts. But he wouldn't say whether the company will lower prices at Harris Teeter stores.
Schlotman said it's too soon to know when the deal might close. A vote by Harris Teeter shareholders and regulatory approval will be required.
As part of the agreement, Kroger will buy all outstanding shares of Harris Teeter stock for $49.38. Kroger officials say that is 33.7 percent higher than the stock was selling on Jan. 18, when media reports first surfaced about the possible sale. It's only about 2 percent higher than the stock's close Monday at $48.52 a share.
Kroger will finance the deal with debt, the company said. The company operates supermarkets under names including its flagship Kroger, as well as City Market, Dillons, Jay C, Food 4 Less, Fred Meyer, Fry's, King Soopers, QFC, Ralphs and Smith's.