Harris Teeter may have Dutch suitor

Royal Ahold seen as likely to bid on N.C.-based company

Bloomberg NewsFebruary 22, 2013 

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

Ahold has contacted JPMorgan Chase, 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 identified 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 Friday. 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’s market value tops $2 billion. Buying the chain would help Ahold expand further in the southern United States and Washington, and its acquisition history and previous expansions position the Dutch chain as a probable bidder, BMO Capital Markets analyst Karen Short said.

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

Harris Teeter disclosed this month that it hired JPMorgan after receiving advances from two private-equity firms, which the company didn’t identify. 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. Two-thirds of its supermarkets are in North Carolina, including 24 in the Triangle. The company reported $4.54 billion in revenue for the year ended Oct. 2.

About 60 percent of Ahold’s sales come from the United States, where it also owns Giant stores, according to data compiled by Bloomberg. The company has sold U.S. assets over the last 10 years after an accounting fraud at an acquired U.S. business. This month, it 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 that include 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,” James Anstead in London and other Barclays analysts 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.”

Staff writer David Bracken contributed.

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