SAN DIEGO & MATTHEWS, N.C., July 9, 2013 /PRNewswire/ -- Shareholder rights attorneys at Robbins Arroyo LLP are investigating the acquisition of Harris Teeter Supermarkets, Inc. (NYSE: HTSI) ("Harris Teeter") by The Kroger Co. (NYSE: KR) ("Kroger"). On July 9, 2013, the two companies announced a definitive merger agreement in which Kroger will acquire all of the outstanding shares of Harris Teeter common stock for $49.38 per share in cash.
Is the Acquisition Best for Harris Teeter and Its Shareholders?
Robbins Arroyo LLP's investigation focuses on whether the board of directors at Harris Teeter is undertaking a fair process to obtain maximum value and adequately compensate its shareholders in the merger, or whether they are seeking to benefit themselves. The $49.38 merger consideration represents a premium of only 1.78% based on Harris Teeter's closing price on July 8, 2013, the last trading day prior to the merger announcement. The 1.78% premium is substantially below the average premium of 31.34% for comparable transactions in the past three years. In addition, Harris Teeter's board adopted an Executive Officer Incentive Bonus Plan, making each of the company's executive officers eligible for an incentive bonus equal to 35% of their current base salary upon the closing of the merger.On May 2, 2013, Harris Teeter released financial results for the second quarter of its fiscal year 2013. For the quarter ended April 2, 2013, the company reported sales of $1.7 billion for which the company reported a gross profit of $359.6 million, or 30.76% of sales. Further, Harris Teeter reported a 7.3% increase in operating profit to $56.3 million compared to $52.5 million in the same period of 2012. In response to these results, Harris Teeter's Chief Executive Officer and Chairman of the Board, Thomas W. Dickson, commented, "We are very pleased with our results for the second quarter …. we continue to realize increased number of active households and customer visits year-over-year. Our pricing and promotional strategies were effective in driving unit sales and increasing market share while increasing quarterly gross margin by 10 basis points over the prior year." Given these facts, the Firm is examining Harris Teeter's board of directors' decision to be acquired by Kroger now rather than allow shareholders to continue to participate in the company's continued success and future growth prospects.