Harris Teeter confirms it's exploring sale of company

Chain may be bought by rival or private equity firm; local shoppers voice dismay

By Ely Portillo

As Matthews-based Harris Teeter confirmed Wednesday that it is exploring a sale of the company, analysts and industry watchers speculated that a private equity fund or rival grocer could buy some or all of the company.

Longtime Harris Teeter shoppers reacted with surprise and dismay.

"We love you, Harris Teeter! Please, please, please don't sell!" read one of the dozens of messages posted on the grocer's Facebook page.

Two private equity firms approached Harris Teeter and "expressed an interest in purchasing the company," the grocer said Wednesday evening in a message posted on its investor relations website. Harris Teeter confirmed that it has retained J.P. Morgan as a financial adviser to explore its options.

Harris Teeter's stock continued to rise Wednesday, closing at $40.72 a share, up 3 percent. That followed a 6.6 percent jump Tuesday. The company's market capitalization Wednesday stood at $2 billion.

Grocery industry analysts are speculating on what might become of the 211-store company, which has two-thirds of its supermarkets in North Carolina.

Jeremy Diamond, a retail analyst based in Baltimore, said in the trade publication Progressive Grocer that he expects a competitor to buy Harris Teeter.

"The company has a solid store base, caters to a higher household income bracket in most of the neighborhoods where it operates, and would have multiple competitors interested in buying the company," Diamond said. He said upscale grocers, including Whole Foods, Wegmans, and Ahold, which operates Giant and Stop & Shop, could buy all or part of Harris Teeter.

Wisconsin-based supermarket analyst David Livingston said he thinks it's more likely a private equity firm might acquire Harris Teeter and sell it piecemeal. "I would expect one of the private equity retail morticians to put the company on life support and sell off all its organs," Livingston said in an email.

He doubted a competitor such as Publix or Kroger would buy Harris Teeter whole. Publix, Livingston pointed out, is a privately held company whose employees hold stock. The Florida-based grocer owns more than 1,000 stores and almost $28 billion in sales. Livingston said Publix's size and its distinctive culture might make it tough to absorb a completely different chain such as Harris Teeter.

Cincinnati-based Kroger, which has 2,435 supermarkets and $90 billion in sales, has only 16 stores in North Carolina, and none in Charlotte since it left the market more than two decades ago. But Livingston said the company has experienced difficulty buying other chains in the past, and he doesn't expect it to buy Harris Teeter.

The competitive environment in Charlotte has become more intense, Livingston noted. Wal-Mart is opening new stand-alone grocery stores and hitting Harris Teeter with a direct price-challenge advertising campaign. And Publix is starting a new Charlotte division, with its first North Carolina store in Ballantyne opening next year.

"Over the past five to 10 years, we have seen Food Lion, Winn-Dixie, Albertsons, and Bi-Lo close stores by the bushel when they have to compete against a Wal-Mart-Publix combo," said Livingston.

Although Harris Teeter was founded in 1960 as a combination of two family companies, 93 percent of its 49.5 million shares are now held by institutional investors. The largest single shareholder is Neuberger Berman, a New York-based asset management firm, with more than 12 percent of the shares. A representative from the firm declined to comment Wednesday.

The company's management and board of directors own about 2.6 percent of Harris Teeter's stock.

Not all analysts believe a sale is inevitable. Charles Ceranosky of Northcoast Research said he considers Harris Teeter a well-run company that could still thrive.

"I don't think it's inevitable," said Ceranosky. "I think Harris Teeter can certainly stand on its own as a regional retailer."

But since Harris Teeter is a public company, it will be obligated to entertain any credible offers that come forward to purchase the company. "Often, these deals are driven by what a buyer wants to do," Ceranosky said.

The outcome is sure to be closely watched by the company's thousands of local workers at its dozens of regional stores, distribution centers and Matthews headquarters and by loyal shoppers.

"Harris Teeter has been my store since it was Harris Supermarket back in the '50s," said Iris Davis, who has lived in east Charlotte with her husband for more than 50 years. "I just trust their food."

So, what will she do if the stores are sold?

"I guess I'll just have to stop eating," she joked.

Staff Writer Celeste Smith contributed.