Shares in Dutch retailer Ahold were up in morning trade today (3 May) as the market responded positively to the sale of Ahold’s US Foodservice unit.
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The news raised hopes that shareholder returns will be increased while it is thought that a merger with Belgian retailer Delhaize could now be on the cards.
Ahold’s share price was up 1.88% at 11.52am (GMT), trading at EUR9.75. Earlier in the morning, shares reached EUR9.98, its highest level since February 2003 when the group revealed an accounting scandal at its US Foodservice division.
Yesterday evening (2 May) Ahold announced that it had reached a deal with US private equity groups Clayton, Dubilier & Rice and Kohlberg Kravis Roberts to sell its US Foodservice business for US$7.1bn.
The company told just-food that it is extremely satisfied with the price it achieved. “It’s a great deal; a very nice price,” Ahold spokesperson Carro Bamforth said today.
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By GlobalDataIndeed, the market is in agreement: “The price received for US Foodservice is about EUR600m ahead of our expectation,” Petercam analyst Fernard de Boer wrote in a note to investors.
Last month, Ahold said that it would increase returns to investors from EUR2bn to EUR3bn through a buyback programme. Speculation has circulated today that this figure could once again rise following the deal.
Ahold declined to comment on the rumours, however, president and CEO Anders Moberg told investors at the groups AGM today that the proceeds would be used to reduce debt and fund the group’s share buyback scheme.
“The proceeds from US Foodservice, our Polish operations, and the other businesses we are currently divesting, will make it possible for us to reduce net debt even further and to return money to our shareholders,” Moberg said. “Last November, we consulted with our largest shareholders on how best to make the return. Their view, and this was nearly unanimous, was that we should buy back shares. I am delighted that we are going to be able to return EUR3bn this way, subject to the approval of the sale of US Foodservice. We will start the buyback program as soon as possible.”
The sale of US Foodservice also sparked renewed speculation that the group may move towards a merger with Delhaize. With the increased focus on the company’s core European and US retail operations, it is believed that the group could pursue bolt-on acquisitions. The slimmed down company is now seen as a better strategic fit with its smaller Belgian rival.
Although merger talk has circulated since last September, Ahold has remained consistently silent on the issue.
