Ahold obliged to split Brazilian assets

A major part of the company's recovery plan is the sale of a number of non-core assets, including all its businesses in Latin America. So far, the Peruvian and Chilean units have been sold, but this week the company's plans to sell the business in Argentina and in Brazil were knocked back.

In Argentina, exclusive talks with the Cencosud group over the disposal of the Disco chain there broke down​ this week, forcing Ahold to begin negotiations all over again, while in Brazil, the competition authorities ruled that Ahold could not sell its G Barbosa and Bompreco units to a single bidder, again delaying their eventual sale.

CADE, the Brazilian competition authorities, said that Ahold would be allowed to proceed with the sale of its business there, provided a number of conditions were met. The regulators said that the Dutch group would be allowed to sell all of the Bompreco supermarket unit and 16 of its 32 G Barbosa stores to one bidder, but that the remaining 16 G Barbosa stores had to be sold to a different bidder.

The decision was taken on the grounds that 16 G Barbosa stores compete with Bompreco outlets, and that selling both companies to the same bidder would give that company an unfair advantage in those particular locations.

While the decision will undoubtedly complicate the negotiations over the sale, at least now that it has been made, Ahold can renew talks with Wal-Mart, the giant US retailer, and CBD, the local market leader in which France's Casino group has a major stake.

When Carrefour dropped out of the race earlier in the year, these two emerged as the only bidders for the Brazilian business, which also includes the Credi-Hiper credit card unit.

An ideal solution for Ahold would be to sell the 16 stores to CBD and the rest of the unit to Wal-Mart, since this would entail the fewest complications. Any bid from CBD would undoubtedly be referred back to CADE because it has the biggest footprint of any retail group in Brazil with more than 500 outlets, so keeping the number of stores it buys to minimum would make it easier to gain approval.

Wal-Mart would also benefit from such a decision, as it would give it a major stronghold in the Brazilian market in one fell swoop. The company has a substantial business in Mexico and a small unit in Argentina, but is otherwise relatively unknown in Latin America - a problem which the world's biggest retailer could address with the Brazilian acquisition.

The question is, would either group want to own half of G Barbosa rather than the complete business, and is splitting up the business likely to have any impact on the likely price Ahold can ask? In any case, negotiations look likely to continue for some time, and almost certainly into next year, prolonging Ahold's agony as it tries to extricate itself its financial difficulties.