KKR Makes $4.6-Billion Bid for Kroger Co.

CINCINNATI — The prospect of a bidding war for Kroger Co. loomed Tuesday as the investment firm Kohlberg Kravis Roberts & Co. offered $4.6 billion for the supermarket operator, topping an offer from Dart Group Corp. made the day before.

Kohlberg Kravis--which earlier this year outbid Dart for Stop & Shop Cos.--offered to pay $58.50 a share for each of Kroger’s 78.6 million outstanding shares, or a total of $4.6 billion.

The New York-based Kohlberg Kravis said in a letter to Kroger that it proposed to buy the retailer for a combination of cash, debt and equity in the company that would be formed after a buyout.

Stock Rises

On Monday, the Haft family, which controls Dart, offered $55 a share, or a total of $4.32 billion, to buy Kroger. A Dart spokesman, Stanley Rubenstein, said the Landover, Md.-based company had no comment on the competing Kohlberg Kravis offer.

Kroger stock soared after the Kohlberg Kravis announcement, closing at $56.25 a share, up $3.50 from Monday in New York Stock Exchange composite trading.

Kroger reacted to the latest offer as it did to the Dart bid, saying it was reviewing the proposal but would continue to explore the possibility of a restructuring.

Kroger said last week that it was considering a $3.8-billion restructuring that could make the company less attractive for a buyout. The Cincinnati-based retailer’s board was to review the proposal by the end of this month.

In its letter Tuesday, Kohlberg Kravis noted the restructuring proposal and the Dart offer and said its own bid “will better serve the interests of the company and its shareholders.”

The investment firm said it would pay $50 in cash, plus $8.50 in securities for each Kroger share.

Sale of Assets Predicted

Dart Chairman Herbert H. Haft also told Kroger in a letter made public Monday that his company was offering shareholders a better deal than the restructuring plan. Haft offered $43 cash a share and securities with a trading value of about $12 a share.

Kroger said its restructuring would involve a special dividend of $40 a share in addition to a junior subordinated debenture with a trading value of about $8 a share. The company has declined further comment on what the restructuring would involve.

Analyst Elizabeth M. Shiels of the investment firm Hilliard Lyons Inc., Louisville, Ky., said Tuesday that the added pressure on Kroger made it likely that the company would sell some assets--either as part of the proposed restructuring or under new ownership.

Kroger would most likely keep its core supermarket business but would consider selling its food production or convenience store operations, she said.

“I think no matter who acquires the company, those are likely candidates,” Shiels said. “It’ll become a smaller company, it’ll become a leaner company.”

Kroger operates more than 1,300 supermarkets, 935 convenience stores and 15 membership warehouses in 29 states. It also processes various food products for sale in its retail stores and to outside customers.