Ahold to sell US retail chains for $660 m

Amsterdam, Dec 23 | Updated: Dec 24 2004, 05:30am hrs
Ahold has agreed to sell its Brunos and BI-LO shop units in the US to Lone Star Funds for $660 million, the Dutch retailer said on Thursday.

Aholds shares rose as much as 3% on the news, with traders citing relief that a deal had been completed, although the price was below market expectations. Ahold, the worlds fourth-largest food retailer and food services group, is selling the assets to help raise at least 2.5 billion euros ($3.35 billion) from disposals before the end of 2004, as part of a recovery plan following an accounting scandal that broke in February 2003.

Ahold is keeping the Giant, Stop & Shop and Tops retail operations in the US, which is its biggest market. They are selling units that eroded the third-quarter results and thereby their US retail profit margin will improve, said Rene Bastiaenen, fund manager at Eureffect.

It confirms the recovery is under way but Ahold is not out of the woods yet, he added.

Ahold shares were up 2.7% at 5.70 euros at 1022 GMT, the top performer in the DJ Stoxx retail index, which was up 0.2%. Aholds high for the day was 5.76 euros.

BI-LO and Brunos will retain all of their debt and other liabilities, including capitalised lease obligations. The deal is expected to close in the first quarter of 2005.

The amount is quite modest but explained by the relatively low profitability, said analyst Stefaan Genoe of Petercam.

He said the impact on group profit margins would be positive, with US retail activities now slightly above their long-term target of 5% for operating profit margin, while the asset disposal target had also been reached.