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Filings show Matthews-based Harris Teeter considered being acquired since 2011

Matthews-based Harris Teeter was in talks with other companies about a merger or acquisition as early as April 2011, according to securities filings late Friday, and more than a dozen potential suitors expressed interest before Kroger Co. won the bidding.

The narrative, part of a proxy statement filed with the Securities and Exchange Commission, doesn’t name any of the other potential acquirers but shows they were a mix of grocers and private equity firms.

In April 2011, the president of an unnamed supermarket chain first approached Harris Teeter President Fred Morganthall at an “industry meeting ... to make an informal inquiry as to whether Harris Teeter would be interested in discussing a combination.”

Harris Teeter CEO Thomas Dickson visited some of the other company’s stores, and three senior executives from the other company visited Harris Teeter stores. The talks continued through early 2012, but the other company ultimately decided not to pursue a deal.

Next, two private equity firms visited Harris Teeter in May and June 2012 to discuss a possible deal. On Nov. 16, 2012, Harris Teeter retained J.P. Morgan to advise it about any possible sale.

In late 2012, J.P. Morgan and Harris Teeter drew up a list of companies that might be interested in buying Harris Teeter and sent information to them. Ultimately, at least 18 companies besides Kroger checked out the possibility of acquiring Harris Teeter, according to the filing.

Kroger first submitted a non-binding proposal in April, indicating it would be interested in buying Harris Teeter for a purchase price between $42 and $45 a share.

Kroger’s major rival appears to have been “Party P,” a company with a “portfolio” of supermarkets, according to the filing. By late April, they were the primary parties interested. Harris Teeter negotiated with Kroger and Party P for months.

Party P offered Harris Teeter $52 per share in cash, but for only 40 million of the company’s outstanding shares. Harris Teeter shareholders would receive 30 percent of the new company’s equity. The cash portion of the deal was just under $2.1 billion.

However, J.P. Morgan advised Harris Teeter that it would take “significant capital” to modify Party P’s stores, which were seeing falling sales, the resulting business would be highly leveraged, and the ultimate value of the 30 percent equity stake was uncertain.

Kroger ultimately increased its cash bid to $49.38 a share, or more than $2.4 billion. Kroger submitted the bid July 7, contingent on Harris Teeter’s board of directors agreeing to it the next day.

On July 8, Harris Teeter agreed to the acquisition.

Portillo: 704-358-5041 On Twitter @ESPortillo
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