Stop & Shop being sold to huge Dutch retailer Kohlberg Kravis stands ready to bag a $900 million profit


QUINCY, Mass. -- Royal Ahold NV agreed yesterday to buy Stop & Shop Cos. for $2.9 billion in cash and assumed debt, the Dutch retailer's boldest move in a buying binge that has made it the fifth-largest grocer in the United States.

The $33.50-a-share offer would result in a profit of $900 million for Kohlberg Kravis Roberts & Co., which invested $100 million in Stop & Shop's 1988 leveraged buyout. The New York investment firm, the grocer's majority shareholder, supports the sale.

The sale also rescues Stop & Shop, which stumbled after making acquisitions aimed at expanding its base beyond New England, where it is the largest grocer.

Earnings dropped for two quarters as Stop & Shop tried to digest the purchases and as once-struggling competitors started turning around.

"People were worried about the high debt and the competition coming in," said Richard Tutino, portfolio manager at Thorsell Parker Partners Inc., which held 203,500 shares as of December. "We're very happy."

Stop & Shop shares closed yesterday at $33.125, up $6.375, in trading of 6.68 million shares, making it the fifth-most-active issue on U.S. markets.

Ahold will pay $1.8 billion in cash and assume $1.1 billion in Stop & Shop's debt.

The acquisition is Ahold's largest purchase in its buying spree of chains in the Northeast, including Finast, Tops, Bi-Lo, Edwards and Pennsylvania-based Giant FoodStores.

Ahold has openly stated its desire to add yet more chains.

Stop & Shop operates 116 superstores, 43 Stop & Shop supermarkets and 17 Mel's Foodtown supermarkets.

The sale by KKR marks the first time that firm sold all of its holdings in a supermarket company at once.

KKR, which also has invested in Safeway Inc., Fred Meyer Inc. and Bruno's Inc., had previously sold only portions of its shares through secondary offerings.

Though KKR is best known for its purchases of brand-name powerhouses such as RJR Nabisco Inc. and Borden Inc., its investments in supermarkets have multiplied many times over.

KKR invested $3.24 a share in Fred Meyer in 1981, and later took it public at $14.25. The Portland, Ore.-based chain now trades at $27.875.

KKR bought Safeway for $2 a share and later took the California grocer public at $11.25. The Oakland, Calif.-based chain now trades at $28.50.

KKR bought Stop & Shop at $3.33 a share and took it public at $12.50 a share in November 1991.

Stop & Shop, with its prime locations and history of excellent operations, fits Ahold's history of U.S. buyouts.

The acquisition of Stop & Shop will boost Ahold's sales to more than $22 billion. The New England chain had sales of $4.12 billion in the year ended last January, while its earnings fell to $67.9 million from $72.8 million.

U.S. sales account for almost half of Ahold's $18 billion in annual sales.

Pub Date: 3/29/96

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