Cerberus Considering Harris Teeter Bid: Report

Following its recent acquisition of several chains from Supervalu, private equity firm Cerberus Capital Management LP is looking at a half-dozen candidates to grow its grocery business, including Harris Teeter Supermarkets, according to a report in The Wall Street Journal.

New York-based Cerberus views the addition of grocery stores as a way to reduce costs through further scale while generating more turnaround opportunities, the report noted.

For some time, publicly traded Harris Teeter, which operates around 200 stores mainly in the Southeast, has been testing the waters for a potential sale. Earlier this month, the Matthews, N.C.-based company said in a securities filing that it was holding discussions with “certain parties” about strategic alternatives, but no deal has been revealed.

Boston-based private equity firm Bain Capital LLC has also reportedly been considering a bid for the chain, according to The Wall Street Journal.

Unlike other grocery chains that Cerberus has acquired or considered purchasing, Harris Teeter carries more expensive products, has a seasoned management team, and is thought to be better-run and less of a turnaround candidate. Cerberus has mostly focused on small, lower-margin businesses that are closely held.

Earlier this year, a Cerberus-led investor group paid $100 million in equity for Supervalu's Albertsons, Acme, Jewel-Osco, Shaw’s and Star Markets locations, for a total of 850 stores. The group additionally assumed $3.2 billion in debt. The transaction brought together Albertsons supermarkets separated in 2006 when Supervalu acquired more than 1,100 Albertsons locations and the Cerberus-led group got more than 650 stores.

When contacted by Progressive Grocer for comment, Harris Teeter noted that in February, it had retained J.P. Morgan Securities LP to aid it in discussions regarding strategic alternatives. PG also reported in February on reports that Amsterdam-based retail conglomerate Ahold was checking out the chain as a potential acqusition.

Any new chains Cerberus purchases would become part of its existing grocery operations, The Wall Street Journal reported, adding that the firm could choose to retain existing banners or to rebrand stores under one of the chains it already owns, may purchase only individual stores rather than chains, decide against any acquisition, or sell off some locations, although Cerberus is said not to be interested in a big divestiture.