28Oct2011

Harris Teeter to Benefit from Sale of Affiliate

Harris Teeter can be expected to benefit as the result of its parent company’s sale of a corporate affiliate for $180 million. The cash potentially could be used for new store growth and repayment of debt.
The supermarket chain’s parent, Ruddick Corporation, Charlotte, N.C., has inked a deal with two newly formed affiliates of KPS Capital Partners, LP to sell all of its ownership interest in its wholly-owned subsidiary, American & Efird, Inc. for $180 million.
Thomas W. Dickson, chairman, president and CEO of Ruddick, said that “as A&E’s business has grown substantially in Asia it has become less of a domestic company and more of a complex international manufacturing company and its strategic fit with Harris Teeter has become less evident to our shareholders.”
According to a press release, this transaction enhances the strategic plan for Ruddick and Harris Teeter as the cash proceeds from the sale can be utilized for numerous purposes, including the acceleration of new store growth and the repayment of debt.
The purchase price is subject to adjustments for working capital and certain liabilities including under funded pension liability and foreign debt. The transaction is expected to be completed by the end of the year.
As a result of the transaction, the Company expects to record pre-tax non-cash impairment losses and other related expenses totaling between $42 and $48 million in the fourth quarter of fiscal 2011, which ended October 2, 2011. The after-tax impact to our fourth quarter results is expected to range between $33 million, or $0.68 per diluted share and $37 million, or $0.75 per diluted share.
Additional expenses, primarily related to the settlement of the pension liability and other employee benefit plans will be determined at closing and are expected to be recorded in the first quarter of fiscal 2012. The amount of these losses will include adjustments for the recognition of a pro-rata share of the pension plan’s accumulated unrecognized net actuarial losses currently included in Accumulated Other Comprehensive Income and the impact from allocating existing plan assets under pension regulations.
These non-cash charges are currently estimated to be approximately $66 million before tax and $40 million after tax, or $0.81 per diluted share. Additionally, adjustments for changes in the plan’s funded status from the Company’s fiscal year end until closing will be made and cannot presently be estimated.

SOURCE: Ruddick Corporation