AHOLD'S TROUBLES SPARK EFFORTS TO REDUCE U.S. HOLDINGS

David Merrefield

There's probably no company in recent memory that has weathered such challenge and change in so short a time than Ahold. That beleaguered company is facing problems ranging from an accounting scandal of huge proportion -- in excess of $1 billion -- to a rejiggering of corporate management and governance philosophy. All this has happened in the space of a year, nearly to the day.

Developments continue unabated for Ahold. As you'll see in this week's SN, one well-respected figure associated with Ahold -- Robert Tobin -- is to leave Ahold's supervisory board in June. Ahold said Bob and another board member were out since they didn't meet the independence criteria newly salted into corporate-governance rules, given that they are previous employees of Ahold affiliates. More than that, Bob came to Ahold in connection with its 1996 acquisition of Stop & Shop, of which he was president and chief executive officer. Later, he became the top officer at Ahold USA and, most recently, was interim CEO of Ahold's U.S. Foodservice operation, the wellspring of most of Ahold's accounting troubles. Bob assumed that task after the accounting scandal came to light and after incumbent management was ushered out the door. (Page 6.)

Now, as was reported in last week's SN, Netherlands-based Ahold has plans to market two of its properties in the United States, Bi-Lo and Bruno's Supermarkets. The objective is to raise funds to reduce the huge amount of debt Ahold amassed in the past dozen years or so assembling a portfolio of food retailing enterprises around the world. Included in that portfolio is the retailing group along the East Coast of this country consisting of six chains, counting the two now on the market. Many parts of the Ahold empire elsewhere have been sold already, or are to be.

The proposal to sell Bi-Lo, Mauldin, S.C., seems the most poignant because Bi-Lo in 1977 became the first asset Ahold acquired in this country. Conversely, Bruno's, Birmingham, Ala., was added in 2001 as Ahold's newest retailing buyout. It makes sense to market the properties at the same time since both are in contiguous geography. Regrettably for Ahold, neither are stellar performers, particularly Bruno's, and both face powerful competition.

That calls into question what price they will fetch. Market analysts have estimated that the chains together could produce from $640 million to $1.5 billion. However, the market for food retailing properties has become quite depressed in the past couple of years, so maybe something in the lower range would be the safest bet. No buyers have surfaced. Despite the performance of these two properties, Ahold generally acquired well in this country owing to its principle of seeking out retailing enterprises that were at or near the top of their game, and that had strong management to be retained or promoted. Bruno's represents one exception to that rule, as does the acquisition a decade ago of Red Food Stores, Chattanooga, Tenn. Red Food was eventually folded into Bi-Lo, and ceased to exist separately. And, of course, the acquisition in 2001 of U.S. Foodservice proved to be the most imprudent of all.