Ahold plan to sell US Foodservice

Financial Times ^ | June 3, 2003 | Ian Bickerton and Robert Clow

[HAL9000]

Ahold wants to sell all or part of US Foodservice, the distribution unit where the discovery of an $880m accounting scandal plunged the Dutch grocery group into financial crisis, according to people familiar with the situation.

The plan has been mapped out by Dudley Eustace, Ahold's interim chief financial officer, and other executives as part of a strategy to reduce 12bn Euros ($14bn) in debt and regain credibility with investors, these people said.

Mr Eustace, who is understood to have received expressions of interest in a range of assets from private equity and venture capital groups, has "made it clear Ahold wants to shed US Foodservice," one person said.

A second person said his company was in early talks with a corporate partner to buy parts of US Foodservice, but added that a sale of the whole company would be logical. Given that talks preliminary, the investor said it was too early to talk about price.

Partnering with another grocery group could bring US Foodservice a credible new management team. Five executives - including Jim Miller, chief executive - have left the company in recent weeks as fall-out from the fraud spread.

Ahold has already announced divestment plans for its South American businesses and sold an Indonesia operation. The company seems to be steering towards concentrating on its core European - and possibly US - retailing assets.

One person familiar with the planned US Foodservice sale cautioned that the plan was Ahold's "ideal scenario" and was subject to revision. "They have been called by everyone in the venture capital world and have held meetings and listened politely," this person said. "But it is premature to talk about selling because Ahold first needs to get to the bottom of the [fraud] situation and that takes time."

Ahold said it did not comment on "rumour and speculation" but said it announced a review of its entire portfolio last November.

One person familiar with Ahold's plans said that even after the resolution of accounting issues, the price tag for US Foodservice was likely to be much smaller than the $3.6bn Ahold paid in early 2000.

Ahold has been rocked by disclosures that more than $900m was wrongly accounted for at US Foodservice and in its US retail operations. It intends to complete shortly a forensic probe of all units and must deliver 2002 group accounts by August 15 in order to access a $915m credit facility, the second unsecured tranche of a ?2.65bn cash lifeline agreed with five banks.

A separate internal legal probe continues at US Foodservice, which is also being investigated by the US Securities and Exchange Commission and Justice Department. That inquiry has widened to include a number of other food suppliers.

[Partisan Hack]

This is being called "Europe's Enron."