Ahold completes purchase of U.S. Foodservice

Columbia company won't be moving, will keep its name

April 14, 2000|By Robert Little | Robert Little,SUN STAFF

Royal Ahold NV said yesterday that it has completed its $3.6 billion purchase of Columbia-based U.S. Foodservice, expanding the Dutch supermarket giant's formidable food-industry realm into the business of food distribution.

U.S. Foodservice will keep its name and remain in Columbia, with little effect on its management or its 13,250-employee work force. It operates 40 distribution centers nationwide and employs roughly 800 people in Maryland.

By closing the deal announced last month, under which Royal Ahold paid $26 per share for U.S. Foodservice's common stock, the $6.8 billion Maryland company became a wholly owned subsidiary of Ahold USA, the American arm of the Dutch company.

Wall Street analysts have called the two companies somewhat of an odd pairing -- Royal Ahold owns 4,000 retail supermarkets around the world, while U.S. Foodservice specializes in selling food and equipment to restaurants, hotels and other institutions.

But most say the deal should give U.S. Foodservice additional cash and leverage to expand. It is one of the top two food distribution companies in the United States, but the top two companies account for just 20 percent of the market, a situation that many analysts say is screaming for consolidation.

"The industry remains attractive from a consolidation standpoint -- there are literally thousands of small distributors in the United States," said Joseph Milano, an industry analyst at T. Rowe Price Associates Inc. in Baltimore.

"U.S. Foodservice had never really stopped acquiring, but they were being increasingly constrained by not having enough cash to buy anything large."

For Royal Ahold, which operates Giant Food Inc. and four other large American supermarket chains, ownership of U.S. Foodservice will allow it to tap into a more robust segment of the food business. The "food-away-from-home" market in which U.S. Foodservice specializes has gradually seized market share from retail grocery stores the last decade.

On Monday, Royal Ahold officials suggested that U.S. Foodservice won't be their last such acquisition. "It provides us with an additional platform for significant growth," Royal Ahold President Cees van der Hoeven wrote in the company's annual report released this week. "With our economies of scale, synergy benefits and expertise, we can jointly build U.S. Foodservice into a powerful and much larger operation.

"In this way, we benefit from the food service industry consolidation, which has only just begun."

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