Friday, November 1, 2013

Could Weis Markets be Kroger's next acquisition?

An October 21 story on Cincinnati.com about Kroger's growth plans specifically mentions A&P and Weis as possible acquisition targets for the nation's largest supermarket chain. In the past year, Kroger executives have indicated a willingness to grow, potentially through more acquisitions. The company is about to close on a $2.5 billion purchase of Harris Teeter.

Although A&P and its 320 stores could reportedly be available for between $500 million to $1 billion, most analysts agree that Kroger would prefer to pursue a healthier company. And Weis, which has experienced strong financials results in recent years, is considered cheap when measured by its price-to-earnings ratio.

Weis, which operates 165 stores in PA, MD, NJ, NY and WV, is undergoing a management change, as CEO David Hepfinger recently left to pursue other interests. Vice Chairman Jonathan Weis is now the CEO on an interim basis.

According to the Cincinnati.com story, analysts say family-controlled companies become more likely to sell out to a larger player when a third generation family member assumes control. Currently, 47 percent of Weis is owned by Robert Weis, the 93-year-old son of the company's co-founder.

Analyst Joseph Feldman of Telsey Advisory Group added that companies with families owning large stakes could make a deal very easy or shut it down, depending on their wishes.

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