(Be sure to read this update: “Sold! Kroger Buys Harris Teeter”).
Cerberus is pretty busy these days shaking up the five grocery chains it acquired earlier this year. But not too busy to consider acquiring a sixth. It’s reportedly made a bid for North Carolina-based Harris Teeter.
If you’re a Harris Teeter shopper – is that a good thing or a bad thing? Well, it depends.
The Wall Street Journal today cites a “person familiar with the matter” in reporting that Cerberus Capital Management has formally made a bid for the grocery chain. No additional details were available, including whether there are other bidders, or whether Harris Teeter will even go through with a sale. When news emerged in February that Harris Teeter was considering a sale (read: “For Sale at Harris Teeter: The Entire Chain?”), it said it had been approached by two private equity firms (Bain Capital, of Mitt Romney fame, is believed to be the other). But the chain insisted it was exploring the possibility of selling only “to fulfill its duty to its shareholders” and that “there can be no assurance that these discussions will result in any transaction.”
But if Cerberus’ bid is a big one, it may be hard for Harris Teeter and its shareholders to resist.
News of the Cerberus bid appears to confirm what the Wall Street Journal reported last month, that Cerberus was looking to acquire even more grocery chains, in part to help produce efficiencies and economies of scale (read much more here: “For Sale: Your Supermarket? Cerberus Eyes New Acquisitions”). And it appears to disprove what many retail analysts had thought of Ceberus since 2006, when it acquired and promptly shut down hundreds of Albertsons locations – killing off the more distressed locations, and fixing up the rest.
This year, the seemingly kinder, gentler Cerberus acquired the rest of the Albertsons chain that it didn’t already own, along with Jewel-Osco, Acme, Shaw’s and Star Market. It insisted that no large-scale closures were planned, and none has happened. Instead, it’s been investing in lower prices and “card-free savings” that don’t require a loyalty card – or a loyalty program, all of which are in the process of being phased out (read: “Shaw’s and Acme Ditch Loyalty Programs, Digital Coupons”).
What does it means for Harris Teeter shoppers, then? The chain is considered more upscale than the ones Cerberus currently owns. So adding Harris Teeter could either be a jewel in Cerberus’ crown, or the chain could start going downmarket to more closely match the image of its corporate cousins. Harris Teeter also has one of the oldest grocery loyalty programs around, dating back to 1997. It would certainly be an adjustment – though not necessarily an unwelcome one for shoppers – to get rid of their VIC cards for good.
Then again, the Wall Street Journal’s source says Cerberus envisions keeping Harris Teeter’s current management and North Carolina headquarters, rather than bringing in its own team as it did with its earlier acquisitions. So if decisions are still being made at the local level, there’s a chance not much will change at all for Harris Teeter, other than the ones paying the bills and earning the profits. Whether it turns out to be a good deal for Harris Teeter shoppers, remains to be seen.
(Be sure to read this update: “Sold! Kroger Buys Harris Teeter”).
