Business Briefs

Stop & Shop owner reportedly interested in Harris Teeter

Posted February 22, 2013

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— Harris Teeter Supermarkets Inc., the Matthews, N,C,-based grocery chain exploring a sale, has attracted interest from Royal Ahold NV, the Dutch owner of Stop & Shop stores, said people with knowledge of the matter.

Ahold has contacted JPMorgan Chase & Co., retained by Harris Teeter to evaluate options, and is seeking more information on the sale process, said one of the people, who asked not to be named because the negotiations are private. Ahold hasn’t made a formal bid, according to that person.

“We regard Harris Teeter as a likely deal for Ahold,” Patrick Roquas, an analyst at Rabobank, wrote in a report today. A transaction wouldn’t hurt Ahold’s stock as it’s unlikely that the Amsterdam-based company is willing to put its “credible track record at risk” by paying too much.

[Harris Teeter operates numerous supermarkets across the Triangle.]

Harris Teeter’s market value tops $2 billion. Buying the chain would help Ahold expand further in the southern U.S. and Washington, D.C., and its acquisition history and previous expansions position the Dutch chain as a probable bidder, said BMO Capital Markets analyst Karen Short.

Ahold “appears to have more than adequate capacity on its balance sheet to complete a transaction,” she said in a Feb. 20 research note. She also listed Lakeland, Florida-based Publix Super Markets Inc. and Cincinnati’s Kroger Co. as possible suitors.

Ahold Stock

Harris Teeter shares advanced 1.5 percent to $42.12, the highest price in more than six months, at the close yesterday in New York. Ahold rose as much as 0.3 percent to 11.01 euros and was trading up 0.2 percent at 12:11 p.m. in Amsterdam. The stock has gained 8.5 percent this year.

Harris Teeter disclosed this month that it hired JPMorgan after receiving advances from two private-equity firms, which the company didn’t name. Representatives at Harris Teeter, JPMorgan and Publix declined to comment, while a spokesman for Ahold said the company doesn’t comment on market rumors. An official at Kroger didn’t immediately return a call seeking comment.

Harris Teeter was co-founded in 1960 by two North Carolina grocers, according to its website. It has more than 200 stores in North Carolina, South Carolina, Virginia, Georgia, Tennessee, Maryland, Delaware, Florida and Washington, D.C. The company reported $4.54 billion in revenue for the year ended Oct. 2, 2012.

Value Indication

Earnings before interest, taxes, depreciation and amortization over the same period amounted to $306.5 million, according to data compiled by Bloomberg. Grocery companies typically sell at 7 to 10 times Ebitda, said one of the people familiar with the situation, indicating Harris Teeter’s sale value could be as much as $3.1 billion.

About 60 percent of Ahold’s sales come from the U.S., where it also owns Giant stores, according to data compiled by Bloomberg. The company has sold assets in the country over the last 10 years after an accounting fraud at an acquired business in the U.S. This month the Dutch company said it agreed to sell its 60 percent stake in Swedish grocery chain ICA for more than $3 billion.

Some brokerages including Barclays expressed skepticism that Ahold would buy all of Harris Teeter, suggesting that returning proceeds from the ICA deal to shareholders would be a better option than buying a grocer that competes against grocers including Wal-Mart Stores Inc.

“We have already assumed in our model that Ahold will return the ICA proceeds to shareholders in the second half via a share consolidation,” Barclays analysts, including James Anstead in London, said in a note. “If the cash was instead spent on significantly increasing Ahold’s exposure to an industry which is undoubtedly competitive, then we would expect shareholders to be unimpressed.”

91 Comments

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  • winterconnie Feb 22, 5:25 p.m.

    Publix is the best as far as I am concerned. When I go to Florida, I wish I could take this store hime to NC.

  • Nancy Feb 22, 4:02 p.m.

    "Several people at my office shop at Harris Teeter so they can use the plastic grocery bags to take their lunch to work. They like to impress the staff. "

    That's a pitiful group of people you work with. I use recycle bags from IKEA, paid 59 cents each for them, I don't 'collect' anyone's plastic bags.

  • Nancy Feb 22, 3:58 p.m.

    "Stop & Shop is #12 on the The Fiscal Times list of "Top 12 Worst Grocery Chains." Incidentally, Food Lion came in #8, and Walmart at #2."

    Wow, that far below FL and I thought FL's was pretty bad :(

  • Terkel Feb 22, 3:34 p.m.

    I once bought a big bag of chicken quarters at FL and when I opened it, was hit hard with the smell of chlorine bleach. Needless to say I didn't use it. It kinda messes up any savings you might have when you have to throw out ten pounds of meat.

  • superman Feb 22, 3:21 p.m.

    Several people at my office shop at Harris Teeter so they can use the plastic grocery bags to take their lunch to work. They like to impress the staff. I like to shop at Food Lion and have cash in my pocket. I am way pass the age of trying to impress people with shoes or high priced grocery stores. I bought about 15 pounds of T-bone steak from Food Lion at $4.99 a pound last week. Saved about $100 off the regular price.

  • Wags Feb 22, 3:20 p.m.

    from an article called the 12 Worst Supermarkets in America (you can Google it)
    Despite its slogan “Great Food. Low Prices. Friendly Service,” Stop & Shop received only slightly-above average marks when it came to cleanliness, but mediocre scores on price, the quality of meat and produce, and service, which is to say, they’re not necessarily doing anything wrong, but they’re not doing much right.
    Read more at http://www.thefiscaltimes.com/Media/Slideshow/2012/04/13/12-Worst-Supermarkets-in-America.aspx#XjEMJcRmOzGJEhJp.99

  • westernwake1 Feb 22, 3:19 p.m.

    "There is only one answer: WEGMANS" - frogger

    Wegmans is great. I wish we had one locally.

  • buford Feb 22, 3:18 p.m.

    I'll miss the HT deli rolls. That is about it. -awr117

    HT has thee BEST deli rolls...the individual ones...they are pricey $.79 a piece but worth it. Like a real NY kiser roll...

  • rushbot Feb 22, 3:17 p.m.

    Was there not a Stop and Shop over in Cary by the shiny diner back in the early to mid 90s..I am pretty sure that was the name..it was nasty, so I can't believe it is comin' back...must be another chain..

  • awr117 Feb 22, 3:14 p.m.

    I'll miss the HT deli rolls. That is about it.

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