- The Washington Times - Wednesday, May 2, 2007

Two private-equity firms agreed yesterday to buy U.S. Foodservice, Royal Ahold NV’s Columbia, Md., food distributor.

Ahold, the Dutch company that also owns Giant Food, had been under pressure from two high-profile shareholders to sell the division, which was at the center of Ahold’s 2003 accounting scandal.

New York equity firms Clayton, Dubilier & Rice Inc. and Kohlberg Kravis Roberts & Co. plan to buy the company for $7.1 billion.

U.S. Foodservice has “a wide range of growth and operational improvement opportunities,” said Michael M. Calbert, of Kohlberg. The private-equity firms plan to “continue executing the strategic initiatives in place,” he said.

The companies declined to be more specific with their plans for U.S. Foodservice.

“Given that U.S. Foodservice is bouncing back from the lows of earlier in the decade, it should be a grand slam for KKR,” Burt Flickinger, managing director of Strategic Resource Group, a New York consulting company, told Bloomberg News. “It’s a business they can fix, rebuild and easily sell a second time.”

Ahold bought U.S. Foodservice, which sells food and products to restaurants, cafeterias and hotels, in 2000 for $3.6 billion. It is the No. 2 U.S. food distributor — behind Sysco Corp. — and had revenue of $19 million last year. Foodservice employs about 450 people in Columbia.

Foodservice figured prominently in Ahold’s 2003 accounting scandal, during which Ahold had to restate nearly $1 billion in earnings over three years. Michael Resnick, Foodservice’s former chief financial officer, pleaded guilty last year to conspiracy in the accounting fraud. More than a dozen other executives and suppliers have pleaded guilty in related cases.

In August, two of Ahold’s major shareholders — Centaurus Capital Ltd. and Paulson & Co. — urged Ahold to sell its U.S. businesses, especially U.S. Foodservice, to focus solely on its European chains. Ahold’s U.S. operations have struggled under competition from discount retailers such as Wal-Mart Stores Inc.

“We have focused on restructuring U.S. Foodservice, strengthening its capabilities and restoring profitability,” said Ahold President and Chief Executive Officer Anders Moberg, who suddenly announced last week that he would leave the company in July “to pursue other career interests.”

Ahold’s shares climbed yesterday to a 52-week high of $13.86. The stock fell slightly to close up 7 percent at $13.65 on the New York Stock Exchange.

Ahold said in a November meeting that it planned to use the sale of U.S. Foodservice to return $2.5 billion to shareholders and settle about $2.5 billion in debt.

Ahold is scheduled to meet with shareholders at its annual meeting today in Amsterdam.

The deal is expected to close in the second half of the year and is subject to shareholder approval.

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