US supermarket chain Kroger plans to acquire smaller rival Harris Teeter for about $2.5 billion, the companies announced Tuesday.
Kroger, which will pay $49.38 per share, plans to finance the takeover with debt. The price is a 33.7 percent premium over the price Jan. 18, 2013, the date of the first media report that Harris Teeter was evaluating strategic alternatives.
Kroger has 2,419 supermarkets and multi-department stores in 31 states. Harris Teeter operates 212 supermarkets, 147 of which have pharmacies. The transaction will strengthen 130-year-old Kroger's position in southeastern and mid-Atlantic US.
Cincinnati-based Kroger expects the transaction to add to earnings per share in the range of 6-9 cents. Kroger anticipates annual cost savings of approximately $40 to $50 million over the next three to four years.
Kroger shares were up 2.3 percent in opening trade. Harris Teeter shares were up 1.1 percent to $49.00.
The deal is subject to normal closing conditions, including a vote in support by Harris Teeter shareholders and regulatory approval.
On June 20, Kroger reported quarterly earnings of $481 million on revenues of $30 billion. Harris Teeter recently reported quarterly earnings of $32.9 million on revenues of $1.2 billion.