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TOPIC: Cerberus Mulls Bid for Harris Teeter

apcowboy

Founder of The Meat Cutter's Club

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Date: May 24, 2013

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Cerberus Mulls Bid for Harris Teeter By SHARON TERLEP, DANA CIMILLUCA And RYAN DEZEMBER http://online.wsj.com/ Cerberus Capital Management LP is eyeing about a half-dozen grocery chains for potential bids, as the buyout shop weighs whether to further expand its grocery business three months after acquiring several chains from Supervalu Inc., One company it is looking at is Harris Teeter Supermarkets Inc., people familiar with the matter said. The grocery business has long been profitable for Cerberus, and the firm sees adding stores as a way to cut costs through additional scale while creating more turnaround opportunities, one of the people said Harris Teeter, a publicly traded grocery chain with around 200 stores along the East Coast, has been exploring a potential sale for months. On May 8, the company said in a securities filing that it is in discussions with "certain parties" about strategic alternatives but that it is unknown whether the talks will result in a deal. Traditional grocery stores like Harris Teeter face increasing competition from club stores such as Costco Wholesale Corp., dollar stores like Dollar General Corp., discount mass retailers like Wal-Mart Stores Inc. and upscale stores like Whole Foods Market Inc. Harris Teeter would be a departure for Cerberus. The grocer offers higher-end goods compared with Cerberus's mostly down-market chains. Also, it has a veteran management team and is seen as better-run and less of a turnaround candidate relative to some of the other businesses the firm is looking at, said the person familiar with the matter, who added that Cerberus at this point hasn't decided whether to seriously pursue a bid. Cerberus is mostly focused on small, lower-margin businesses that are closely held, the person said. Cerberus is reviewing these companies' financial information and discussing internally whether it makes sense to add stores following the Supervalu acquisition in February. In that deal, a Cerberus-led investor group paid $100 million in equity for Supervalu's Albertsons stores and four of its other chains including Chicago's Jewel-Osco and New England's Shaw's, 850 stores in all. The group also assumed $3.2 billion in debt. The deal reunited Albertsons supermarkets broken up in 2006 when Supervalu acquired more than 1,100 Albertsons grocery stores and the Cerberus-led group acquired more than 650 locations. The 2006 deal proved a winner for Cerberus and its four real-estate partners in the investment, publicly traded Kimco Realty Corp., Chicago's Klaff Realty LP, Philadelphia's Lubert-Adler Partners LP and Schottenstein Real Estate Group of Columbus, Ohio. They bought what some considered the dregs of the Albertsons chain at a steeply discounted price that was essentially the value of the underlying real estate. __________________ Leon Wildberger Executive Director

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