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    Biggest supermarket operator is getting bigger

    Kroger to buy a 212-store chain, Harris Teeter

    Kroger Co., the buyer, operates at 2,419 locations in 31 states. Its namesake stores account for over half its stores.
    Michael Conroy/Associated Press/File 2012
    Kroger Co., the buyer, operates at 2,419 locations in 31 states. Its namesake stores account for over half its stores.

    NEW YORK — Kroger Co., the country’s largest traditional supermarket operator, is expanding its reach in key Southeast and mid-Atlantic states by snapping up Harris Teeter Supermarkets Inc.

    The $2.44 billion cash deal reflects Kroger’s growth plans as supermarkets fight competition from big-box retailers such as Target Corp. and Walmart Stores Inc., as well as drugstores and dollar stores that are expanding their food sections.

    Harris Teeter has 212 stores in eight states. That includes locations in Delaware, Florida, Maryland, and Washington, D.C., where Kroger has no presence. Kroger doesn’t plan to close any stores, but in regions where there is overlap it may be asked by the Federal Trade Commission to sell stores to maintain a competitive landscape, said Mike Schlotman, Kroger’s chief financial officer.


    Harris Teeter stores will keep their names and personalities, as have the nearly two dozen other regional chains owned by Kroger, including Ralphs in Southern California, Fred Meyer in the Pacific Northwest, and Fry’s in Phoenix, the company said.

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    ‘‘I don’t see a lot of change that we would make to Harris Teeter,’’ Schlotman said. ‘‘It already has a large fresh and prepared section — that’s one of the things they’re good at.’’

    That focus on fresh and prepared foods is what makes the deal attractive to Kroger. While they are not on the level of Whole Foods supermarkets, Harris Teeter stores tend to be in more affluent neighborhoods and are more profitable.

    Kroger has been expanding the ranks of its Fresh Fare stores, which have bigger sections for produce, meat, seafood, and prepared foods. These categories tend to have higher profit margins, Schlotman said.

    Harris Teeter also offers a ‘‘click and collect’’ service in about half its stores that lets people shop online and then pick up the groceries curbside or at the front of the store.


    Harris Teeter, along with Ralphs, will be one of Kroger’s largest chains by store count.

    Kroger will pay $49.38 for each Harris Teeter share, a 2 percent premium. The deal has been approved by both companies’ boards but not Harris Teeter shareholders.

    Kroger, of Cincinnati, operates 2,419 stores in 31 states. Its namesake stores account for more than half its stores.

    Harris Teeter’s fiscal 2012 revenue was about $4.5 billion.

    Schlotman said the deal marks Kroger’s entry into several attractive, high-growth markets such as Charlotte, N.C., and Washington, D.C. But he declined to say whether the company planned to eventually expand to all 50 states.


    Harris Teeter will become a Kroger subsidiary and will continue to be led by members of its current senior management. The division will remain based in Matthews, N.C.

    Kroger expects the deal to result in cost savings of $40 million to $50 million over three to four years. It will finance the deal with debt and plans to assume Harris Teeter’s outstanding debt of about $100 million.