Ahold Continues to Deconsolidate

THE POSSIBILITY OF a merger between Ahold and Delhaize was a hot topic in the Old World business press this summer, and some analysts think the two trans-Atlantic food retailers are getting closer to a merger than ever. After a strategic review of its assets that took several months, Amsterdam-based Ahold said last month that it would divest its Tops supermarket chain, based in Buffalo, N.Y., and

THE POSSIBILITY OF a merger between Ahold and Delhaize was a hot topic in the Old World business press this summer, and some analysts think the two trans-Atlantic food retailers are getting closer to a merger than ever.

After a strategic review of its assets that took several months, Amsterdam-based Ahold said last month that it would divest its Tops supermarket chain, based in Buffalo, N.Y., and its U.S. Foodservice distribution business, based in Columbia, Md.

“In our opinion, this essentially pares the [Ahold] chain down to a set of assets that Delhaize can be more interested in,” said Perry Caicco, an analyst with CIBC World Markets, Toronto, in research note last month. “It may take some time but we now see the possibility of an Ahold-Delhaize combination as much more likely.”

Both Ahold and Brussels-based Delhaize Group have declined to discuss the reports that they have discussed a merger, which began to surface after two Ahold investors began to press for changes at the company, calling for it to split its U.S. and European operations.

In addition to Tops and U.S. Foodservice, Ahold also owns the Stop & Shop, Giant-Landover and Giant-Carlisle chains in the U.S. and several chains in Europe. Delhaize owns Hannaford Bros., Food Lions and Sweetbay/Kash n' Karry in the U.S. and other chains in Europe and Asia.

Ahold began dismantling Tops in 2005 with the sale of its easternmost stores, followed by the sale this year of its westernmost stores, which included 46 locations in Ohio. Just this month the company closed the last of them, after selling 13 to Pittsburgh-based Giant Eagle and another three to Giant Eagle customers. Another 12 were sold to other operators in the area.

Potential buyers for Tops' remaining stores, according to local observers, include private equity firms that may or may not want to structure a combination of Tops with Syracuse, N.Y.-based Penn Traffic, and strategic buyers like Giant Eagle and Price Chopper, Schenectady, N.Y.

While Ahold seeks the sales of those businesses, it is also working to right the ship at Stop & Shop and Giant-Landover with a new everyday-low-price format. This month the company said it would accelerate the rollout of the pricing strategy, which is similar to one Ahold deployed at its Albert Heijn chain in the Netherlands, to more categories.

Meanwhile, throughout the year the courts decided the fates of many of the principals at the heart of Ahold's 2003 financial implosion, when the company reported that it had overstated its profits over a three-year period by an amount later determined to total more than $1 billion.

A Dutch court gave nine-month suspended sentences to Cees van der Hoeven and Michiel Meurs, Ahold's former chief executive officer and chief financial officer, respectively, who were both convicted of fraud in the case. The court also fined each 225,000 euros ($286,800). Jan Andreae, former Ahold board member for Europe, was convicted of forgery and given a suspended sentence of four months and fined 120,000 euros, or about $153,000. Roland Fahlin, former supervisory board member, was acquitted.

In the U.S., several officials at U.S. Foodservice were sentenced for fraud, and some vendors who participated in the division's schemes were also sentenced.