MATTHEWS, N.C. -- The Kroger Company announced Tuesday morning that it will buy Matthews-based Harris Teeter Supermarkets for $2.5 billion in cash.
Kroger will pay $49.38 for each of its rival supermarket chain's shares. The price represents a 2 percent increase over the company's Monday closing stock price.
"This is a financially and strategically compelling transaction and a unique opportunity for our shareholders and associates," Kroger Chairman and CEO David Dillon said in a statement.
Harris Teeter operates 212 stores in southeastern and mid-Atlantic markets, along with a pair of distribution centers and a dairy facility. Its fiscal 2012 revenue totaled about $4.5 billion.
In comparison, Kroger operates 2,419 stores in 31 states. In addition to its flagship brand of supermarkets, it also owns Ralphs, Fry's and Food 4 Less.
After the deal closes, Harris Teeter will become a Kroger subsidiary and will continue to be led by members of its current senior management. There are no plans to close stores and the company will remain based in Matthews.
Cincinnati-based Kroger Co. says it expects the deal to result in cost savings of $40 million to $50 million over the next three to four years.
Kroger will finance the deal with debt and plans to assume Harris Teeter's outstanding debt of about $100 million.
The transaction price represents a premium of 33.7 percent to the Harris Teeter closing share price on January 18, 2013, according to a press release.
The terms of the agreement were approved by the Boards of Directors of both companies.