Ahold to Pursue Sale Leaseback of US Storess?

The Guardian - August 14, 2006

Two leading shareholders in Royal Ahold called today for the break-up of the troubled retail group, including the sale of its US business. The hedge funds Centaurus Capital and Paulson, which together own 6.4% in Ahold, said the group needed 'drastic strategic action' to deliver shareholder value and urged talks with the board and other shareholders about its future. They said a restructuring could value Ahold at €9 a share, or a quarter more than now.

The Dutch company, often described as Europe's Enron, almost collapsed three years ago after overstating earnings at its US Foodservice distribution business by £970m in the Netherlands' worst accounting scandal. Last year it paid €803m to settle a US class-action suit.

The London-based Centaurus and New York-based Paulson said: "We believe keeping Ahold's disparate retail and wholesale interests together diminishes shareholder value and limits the operating potential of the individual businesses.

The US businesses, including the supermarket chains Stop & Shop, Giant and Tops, account for €33bn of Ahold's annual sales of €44.5bn but Mr Moberg admits that they face fierce competition from rivals such as Wal-Mart and are struggling to meet their 5% operating margin target.

Sources close to the hedge funds said nobody at board level had any direct experience of the ferociously competitive US retail market.

It is stressed that the sale of the US businesses is just one, albeit a preferred, option and others include the sale and lease-back of property and the disposal of several underperforming chains. Sphere: Related Content