Harris Teeter Supermarkets Inc. (HTSI:US), the Matthews, North Carolina-based grocery chain exploring a sale, has drawn interest from Publix Super Markets Inc. (PUSH:US), said people with knowledge of the situation.
Royal Ahold NV (AH), the Dutch owner of Stop & Shop stores, also expressed interest in Harris Teeter, people familiar with the situation said last week. Neither firm has made an offer, according to the people familiar with the matter, who asked not to be named because the process is private. First-round bids aren’t due until mid-March or later, the people said.
If both Publix and Ahold make offers for the grocer, whose market value is more than $2 billion, it could face an active auction. Harris Teeter said last month it hired JP Morgan Chase & Co. to seek options after two private-equity firms expressed interest in buying the company. Publix would gain a new presence in Virginia and North Carolina by acquiring Harris Teeter, said BMO Capital Markets analyst Karen Short.
“Publix has more than adequate capacity on its balance sheet to finance” a deal with 100 percent debt, given its net cash position, she said in a Feb. 20 note. The question is whether Publix would want to pay a large enough premium to complete the deal.
“Publix rarely makes acquisitions, and valuation could be a hurdle,” she wrote.
Representatives at Harris Teeter, JPMorgan and Publix declined to comment. Closely held Publix has announced plans to open two stores in North Carolina in 2014.
Harris Teeter advanced less than 1 percent to $43 at the close yesterday in New York, the highest price in more than a year.
The company 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.
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 a person familiar with the situation, indicating Harris Teeter’s sale value could be as much as $3.1 billion.
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