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Ahold Buyback Raises Questions

AMSTERDAM — Ahold’s announcement last week that it would ramp up its stock-buyback program left some observers wondering if it might be stockpiling cash for acquisitions.

Ahold said it has increased its share buyback program to about $2.6 billion in the wake of the sale of its ICA subsidiary in Sweden. The company said it received about $3.27 billion from the disposition of ICA, which provided most of the company’s $2.5 billion in net income in the fourth quarter.


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Some analysts reportedly had hoped for a bigger share buyback, and some questioned the company’s plans for deploying the rest of the proceeds of the ICA sale.

Asked by an analyst during a conference call if the funds could be used toward making a large acquisition, Jeff Carr, executive vice president and chief financial officer, Ahold, said, “If we see good-quality assets, which we feel we can get, that we can improve, where we can create value for our shareholders, then that’s clearly something … that we will look to participate in.”

Dick Boer, chief executive officer, added that Ahold was “happy with the position that those proceeds put us in,” and said the company would “invest them wisely to the best interests of all shareholders over the near to mid-term.”

Ahold has repeatedly stated its interest in expanding through acquisitions such as the recent purchase of several Genuardi’s stores in the Philadelphia market, and has reportedly eyed the possible acquisition of Harris Teeter, which put itself up for sale earlier this year.

Pick-Up Points

Boer also said Ahold currently was reviewing the marketing around its 19 U.S. grocery “pick-up points” where customers can pick up groceries they have ordered online.

“The ones we have opened in the Netherlands have a clear, great track record from customers,” he said, noting that the company has processed about 50,000 transactions from half a dozen locations in its home country in the first six months of operation.

“That tells something [about] how the customers really like these pick-up points,” he said.

“In the U.S., it’s a bit different. We are reviewing at this moment our marketing campaigning around it. But it’s clearly … answering customer demands.”

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In addition, Ahold USA said it has revamped the terms of its participation in a union pension plan at its Stop & Shop division in New England in order to limit its potential liability.

In reporting first-quarter earnings, Ahold said it took a pre-tax charge of $82 million in the quarter related to the settlement of the multiemployer pension plan with the New England Teamsters and the Trucking Industry Pension Fund.

Underlying operating income in the U.S. in the quarter was flat at about $328 million, compared with the year-ago quarter.

As previously reported, sales were $8.1 billion, up 3.4% due to identical-store sales growth of 1.8% — 1.9% excluding gasoline — and benefiting from the inclusion of 15 former Genuardi’s.

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