Kroger Company, Harris Teeter complete merger

The Kroger Company (NYSE: KR) and Harris Teeter Supermarkets Inc (NYSE: HTSI) announced that the merger transaction between the two companies was completed January 28, 2014. Under terms of the agreement, Harris Teeter shareholders will receive $49.38 per share of Harris Teeter common stock.
The transaction allows Kroger to expand with the Harris Teeter brand and a base of 227 stores in the southeastern and mid-Atlantic markets and in Washington DC. Harris Teeter also operates distribution centers for grocery, frozen, and perishable foods in Greensboro NC and Indian Trail NC and a dairy facility in High Point NC. It will continue to operate its stores under the Harris Teeter brand name as a subsidiary of The Kroger Co. Harris Teeter had revenues of $4.7 billion for fiscal year 2013.
Kroger financed the transaction through a combination of debt issued in December 2013 and commercial paper. Although Kroger’s net debt to EBITDA ratio increased due to the merger close, the company expects to allocate some free cash flow to debt reduction to re-establish and maintain its net debt to EBITDA ratio over the next 18-24 months.
Including the effect of allocating some free cash flow to debt reduction, Kroger continues to expect net accretion to earnings per diluted share in the range of $0.06–$0.09 in the first full year after the merger, excluding transition and transaction expenses, after taking into account the company’s current 8-11% long-term net earnings per diluted share growth rate. Kroger expects to achieve cost savings of approximately $40 to $50 million, largely from the benefits of Kroger’s enhanced scale, within the next four years.
As of January 28, shares of Harris Teeter common stock ceased to trade on the New York Stock Exchange.
The combined companies will operate 2,641 supermarkets and employ more than 368,000 associates across 34 states and the District of Columbia. Harris Teeter will continue to be led by its current president, Fred Morganthall. There are no plans to close stores, and associates will continue to have employment opportunities. Kroger is headquartered in Cincinnati OH, and Harris Teeter remains based in Matthews NC.

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