Ahold split demanded

2 big investors in Dutch firm call for sale of U.S. assets


Two major investors in Royal Ahold NV called yesterday for the Dutch company to sell its U.S. businesses, which include Giant Food, a major supermarket chain in the Baltimore-Washington market, and U.S. Foodservice of Columbia.

Hedge funds Paulson & Co. and Centaurus Capital Ltd., which together hold 6.4 percent of Ahold's stock, said a sale of U.S. assets would unlock the value of Amsterdam-based Ahold, which also has extensive operations throughout Europe.

Ahold's market value plunged by two-thirds in one day in 2003 after an accounting scandal surfaced at U.S. Foodservice, which is the nation's No. 2 distributor to restaurants and other food-service establishments.

While the stock has bounced back since then, Paulson and Centaurus say that if Ahold were restructured, its shares could be worth more than 9 euros apiece, or about $11.40.

Ahold shares gained 3 percent yesterday in Amsterdam to 7.33 euros, or $9.32, the highest level in a year.

"The company needs drastic strategic action to deliver shareholder value," according to a statement from the hedge funds. "One of the best strategic actions to take for the future prospects of the company and for enhancing shareholder value is to sell Ahold's U.S. businesses and become a pure-play European retailer."

Ahold spokesman Walter Samuels declined to comment. He said company officials have not met with officials from the funds, who said they would be seeking a "constructive dialogue" with Ahold.

The funds asserted in the statement that keeping Ahold's "disparate retail and wholesale interests" under one corporate structure limits the potential of individual businesses.

Ahold's vast web of subsidiaries stretches from Skokie Ill., where it owns online grocery service Peapod LLC, to Krakow, Poland, where the company operates more than 170 supermarkets.

Retail stores in the United States and U.S. Foodservice accounted for nearly 75 percent of Ahold's sales last year. But sales have been sluggish recently at Giant and other stores struggling to compete with Wal-Mart Stores Inc. and supermarkets with bigger discounts and wider selection.

Giant operates 192 supermarkets in Maryland, Virginia, the District of Columbia and Delaware (where stores carry the Super G name). Ahold's other assets also include the Stop & Shop grocery chain of Quincy, Mass., and another Giant Food subsidiary in Carlisle, Pa.

Locally, Giant has undergone several changes since it was acquired eight years ago by Ahold.

Among other things, the grocer has faced customer criticism about poor service and out-of-stock items, something Giant has said it has worked to improve. Ahold also merged Giant's administrative operations with its New England supermarket chain Stop & Shop.

Earlier this year, Ahold said it planned to build larger stores and focus on lowering prices in an effort to improve its U.S. supermarket division.

Ahold said last month it plans to sell 46 of its Tops supermarkets in Ohio to focus on Tops stores in New York and Pennsylvania.

The grocery industry has undergone consolidation in recent years. In June, Supervalu Inc. acquired Albertson's Inc., with 1,100 stores, for $9.7 billion to become the No. 3 supermarket chain.

FTN Midwest Securities analyst Charles Cerankosky said deals have been done piecemeal because buyers are only interested in certain markets or in certain stores for the prime real estate.

"It really is a buyer's market right now," he said.

Ahold acquired the Landover-based Giant in October 1998 for $2.7 billion. It bought U.S. Foodservice in April 2000 for $3.6 billion, only to be hit by the accounting scandal three years later. Prosecutors in a federal criminal case against former U.S. Foodservice executives say the unit overstated earnings by about $800 million.

Cerankosky said that grumbling from shareholders won't necessarily lead to Ahold selling off businesses it spent years amassing.

"Keep in mind that just because an investor suggests that a company sell or break itself up doesn't mean it's going to happen," he said. "The idea could simply be rejected by the board and business could go on."


Baltimore Sun Articles
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.