- The Washington Times - Monday, August 14, 2006

Two of Royal Ahold NV’s largest shareholders yesterday urged the company to sell its U.S. business, including Giant Food Inc., the Washington area’s largest grocer.

Centaurus Capital Ltd. and Paulson & Co. Inc., London and New York investment companies, said the Dutch retailer could increase shareholder value by selling its U.S. components and focusing solely on its European operations.

The investment companies, which say they together own 6.4 percent of Ahold, said the company needs to take “drastic strategic action.”

“0ne 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,” the companies said yesterday.

About two-thirds of Ahold’s sales comes from its U.S. chains: Stop & Shop/Giant-Landover, Giant-Carlisle (Pa.)/Tops and U.S. Foodservice. Giant, which was bought by Ahold in 1998, was founded in 1936 in the District. There are 187 Giant stores in the District, Maryland and Virginia.

“Ahold needs to do something to increase the transparency,” said Ton Van Ooijen, an equity research analyst at Kepler Equities in the Netherlands. “Selling some of the activities seems logical. It’s probably more logical to sell only the U.S. Foodservice activities and not [the supermarkets].”

Mr. Van Ooijen, who increased his rating of the company from “hold” to “buy” on the news, said Ahold is likely to at least take notice of the letter.

“Investors are getting a little bit tired of Ahold. They should do something now,” he said. Kepler owns shares of the company.

Other analysts said Ahold likely would have to redeem all of its outstanding debt before a potential buyout, weakening Centaurus and Paulson’s idea.

“We see some logic in a break-up but not one triggered by [a leveraged buyout],” JP Morgan & Co. European retail analyst Jaime Vazquez said in a research note. “Plus, it would be unlikely to happen anytime soon. We think a break-up done in stages would make more sense and would give full upside to Ahold’s shareholders.”

JP Morgan has an investment banking relationship with Ahold.

European analysts said the open letter could be a call to gather support from other investors.

The investment companies said Ahold could garner about $11.44 per share. Analysts said that figure was high and estimated Ahold could get about $10.17 per share.

Yesterday, Ahold’s shares rose about 27 cents, or 3 percent, on the news to close at about $9.32 in Amsterdam. Shares jumped 2.5 percent to close at $9.26 on the New York Stock Exchange.

Ahold Chief Executive Officer Anders Moberg said earlier this year that the company needed to speed up sales growth and that it is reviewing its unprofitable chains, including the Tops stores. Ahold is also expected to announce a restructuring program for Stop & Shop, its Quincy, Mass., grocery chain, in the fall.

Sales slowed at Ahold’s U.S. chains last quarter as they tried to compete with discounter Wal-Mart Stores Inc.

Last week the company said Giant-Landover’s net sales rose 0.1 percent to $8.9 billion for the first half of 2006. At Giant-Carlisle/Tops, sales fell 4.9 percent to $3.3 billion. Sales at U.S. Foodservice, a Columbia, Md., distribution company, rose 3.2 percent to $10.2 billion.

In comparison, sales at Ahold’s European grocery chains — Albert Heijn, Central Europe and Schuitema — rose about 3.6 percent during the first half of 2006 to about $8 billion.

Ahold spokesman Walter Samuels declined to comment on the press release yesterday, but said, “We have a strong belief in ourselves and our potential and our stores. If you look at where we came from in ‘03, we came back and now it’s time to focus on the business, and we’re fully aware of that. We have a lot of potential with our banners.”

In 2003, Ahold’s chief executive officer and chief financial officer resigned and the stock tumbled after the company overstated 2000 and 2001 earnings, mostly related to U.S. Foodservice. It has since been rebuilding the brand.

Mr. Samuels said Ahold has not been in communication with the investment companies, as some British publications have said.

Mr. Van Ooijen said the U.S. chains probably would have many interested buyers.

“They are active in very wealthy areas and they have good profit margins,” he said. “A lot of buyers should be interested.”



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