Ahold to sell 5 Latin chains

Dutch retailer is hoping to ease financial crisis

Sale could bring $645 million

429 stores in Paraguay, Brazil, Peru, Argentina

April 04, 2003|By Lorraine Mirabella | Lorraine Mirabella,SUN STAFF

Dutch food retailing giant Royal Ahold NV, mired in an accounting scandal at its Columbia-based U.S. Foodservice subsidiary, said yesterday it plans to shed its South American supermarket chains to trim debt of more than $12.8 billion.

Royal Ahold, which is being investigated by the Justice Department and the Securities and Exchange Commission, will sell 429 supermarkets in Brazil, Argentina, Peru and Paraguay "to concentrate on its mature and most stable markets," the company said.

Those businesses generated about 2.34 billion euros ($2.52 billion) in sales last year.

Analysts placed the value of the South American businesses at between 500 million and 800 million euros. One Dutch analyst, Oscar Poos of Oyens & van Eeghen, said the sale could raise 600 million Euros, or $645.5 million.

Yesterday's announcement was Ahold's first regarding plans to sell assets since the company announced in late February that accounting irregularities caused it to overstate profit by at least $500 million over the past two years.

The news sent the value of Ahold's shares down by more than 60 percent. Ahold's American depositary receipts rose 6 cents yesterday to close at $3.57 on the New York Stock Exchange.

Analysts said they expect more announcements of plans to sell assets in coming months - and that Ahold might look to shed operations in Asia and central and southern Europe.

"Most people expect this will be just the start of the process and expect a number of similar announcements before [Ahold] gets back to the core business," said one European food retailing analyst who spoke on the condition of anonymity.

Royal Ahold has not yet entered into negotiations, but "some parties have made it known that they are interested," said Cindy Leggett-Flynn, an Ahold spokeswoman.

The most likely buyers are France's Carrefour SA, the world's second-biggest retailer behind Wal-Mart, and Casino Guichard-Perrachon, a French supermarket chain. Both have previously expressed interest in Ahold assets in areas where they already have a presence, analysts said.

Ahold, the world's third-largest owner of supermarket chains, including Giant Food Inc. of Landover, declined yesterday to comment on a potential sale prices for its South American chains.

`Expeditiously'

Theo de Raad, a member of Ahold's corporate executive board who oversees the businesses in Latin America and Asia, said the company plans to "proceed expeditiously."

But "we are determined to maximize the value we receive for these operations and obtain the best possible results for all our stakeholders," de Raad said.

Royal Ahold decided last year to explore selling non-core businesses.

But some analysts believe the accounting turmoil has prompted the company to accelerate its plans.

Ahold will likely keep its profitable U.S. food retailers, including Giant Food, its Dutch supermarkets and possibly U.S. Foodservice, which investigators are looking into to see whether rebates or discounts from vendors were incorrectly booked as income.

As the investigations continued yesterday, three major suppliers of U.S. Foodservice - Kraft Foods Inc., H.J. Heinz Co. and General Mills Inc. - said they have been contacted by the SEC and asked to turn over documents as part of the probe.

Renee Zahery, a spokeswoman for Kraft Foods North America, said the SEC contacted the supplier a week ago requesting information.

"We're happy to cooperate fully with their request for information," Zahery said. "We've conducted all of our business with Ahold appropriately."

`Cooperating fully'

General Mills' chairman and chief executive officer also noted yesterday that the company had been contacted by the SEC.

"We will be cooperating fully with their request for information," the executive, Stephen W. Sanger, said during a consumer products industry conference in New York.

Heinz was contacted as well, within the past few days, said spokesman Jack Kennedy.

Chains that will be up for sale include two wholly owned properties in Brazil - Bompreco and G. Barbosa, which had net sales of $1.4 billion last year - and a related customer credit-card business.

Accounting probe

In Argentina, Ahold plans to divest its wholly owned subsidiary, Disco SA. That subsidiary is also the subject of an accounting investigation by Ahold's auditors, Deloitte & Touche.

Ahold said the chain's 236 stores had net sales of $819.7 million last year. It has remained a strong competitor despite a turbulent economy that has eroded buying power among consumers of all income groups, Ahold said.

The company also plans to sell one of its smaller operations, a 32-store chain in Peru with $261.4 million in net sales last year, as well as 10 stores in Paraguay that generated net sales of 36 million euros, or $38.7 million, last year.

Bloomberg News contributed to this article.

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