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In the wake of the news that The Kroger Co. will acquire Harris Teeter for $2.5 billion in a transaction which Kroger will purchase all outstanding shares of Harris Teeter for $49.38 per share in cash, a number of legal firms from around the country have initiated investigations probing whether the pending merger is in the best interest of the Matthews, N.C.-based regional retailer’s shareholders.
San Diego-based shareholder litigation firm Robbins Arroyo LLP is one of several firms investigating 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 firms’ investigation centers on the $49.38 per-share price and companion contention that it represents a premium of only 1.78 percent based on Harris Teeter’s closing price on July 8, 2013, the last trading day prior to the merger announcement. Alleging that the 1.78 percent premium is substantially below the average premium of 31.34 percent for comparable transactions in the past three years, Robbins Arroyo is questioning “an executive officer incentive bonus plan” Harris Teeter’s board adopted that it said will enable each of the company’s executive officers to be eligible for an incentive bonus equal to 35 percent of their current base salary upon the closing of the merger.
Citing Harris Teeter’s FY 2013 second quarter financial results that reported sales of $1.7 billion, for which the company reported a gross profit of $359.6 million, or 30.7 percent of sales, and a 7.3 increase in operating profit to $56.3 million versus $52.5 million in the year-ago period, the shareholder advocacy firm said it “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.”
Harris Teeter shareholders are being offered an option to file a class action lawsuit to secure the best possible price for shareholders and the disclosure of material information so shareholders can vote on the transaction in an informed manner.
As noted above, a number of other class action firms are seeking to initiate similar shareholder lawsuits to levy potential legal claims against the Harris Teeter’s board regarding alleged breaches of fiduciary duties and other violations related to the company’s pending acquisition by The Kroger Co.