Ahold Sells US Foodservice, Tops Chain

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Ahold Sells US Foodservice, Tops Chain

COLUMBIA, Md. -- Dutch company Ahold is putting parts of its U.S. operations, including its US Foodservice distribution unit, on the chopping block in order to cut costs and debt in a strategy to boost profitability, Reuters reported. The company also plans to sell its Tops retail chain and operations in Poland and Slovakia.

"The US Foodservice has the potential to further improve its performance, but we see limited near-term synergies between it and retail operations. Therefore, we have decided to focus our resources and expertise wholly on the future growth of our retail businesses. We will complete our exit from the foodservice industry by divesting US Foodservice," the company said in a statement released yesterday.

Ahold affirmed rumors that it would sell U.S. Foodservice, which is valued at more than five billion euros by analysts and could raise 4.5 billion euros from the sale. The unit was at the center of a one billion euro accounting scandal in 2003. "Since the crisis in 2003, we have completed a comprehensive revitalization program," Ahold president and chief executive Anders Moberg said in a statement. "It is now time for us to focus our efforts on strengthening our retail competitive position, particularly in the United States."

Moberg initiated the review earlier this year due to rivalry from grocery chains, Kroger and Safeway Inc. He also reaffirmed targets of 5 percent growth for both retail operating margins and net sales, both of which were in line with analysts' expectations.

Potential buyers were not disclosed, however Moberg noted that there is "lots of interest out there," the report stated. However, a source close with the matter told Reuters that private equity firms, Clayton, Dubilier & Rice, Kohlberg Kravis Roberts and Cerberus Capital Management are interested in the business unit.

Ahold, owner of supermarkets such as Stop & Shop and Tops, will return two billion euros, or $2.5 billion USD, to shareholders and cut debt by the same amount, according to yesterday's announcement. Operating costs are to be cut by 500 million euros by the end of 2009 through the sell-off of many of the company's assets in other countries.