Ahold agrees Disco sale
Argentine unit Disco - to Cencosud, the Chilean retailer which had
originally agreed to buy the company back in November. After
withdrawing entirely from the Asian market last week, Ahold now has
just two Latin American businesses left to sell.
The sale of Disco has been delayed by lengthy negotiations over the company's liability for losses incurred by Ahold's erstwhile partner, Velox. A group of disgruntled investors in two Uruguayan banks owned by the bankrupt group have been trying to hold Ahold responsible, and potential buyers have been understandably cautious about the possibility of facing a substantial compensation payment.
This was the principal reason why Cencosud's original bid for Disco fell through in December - and why subsequent negotiations with local entrepreneur Francisco de Narvaez and France's Casino group also broke down.
But Cencosud's interest in the Disco business remained strong - the Chilean market leader operates just 12 hypermarkets in Argentina and the addition of a further 200 or so Disco stores was too great an opportunity to ignore - prompting it to return to the negotiating table.
However, the sticking point of Velox's liability remains, and the sale will only go through providing the Argentine and Uruguayan courts agree.
"Certain Argentine and Uruguayan court orders currently are in effect that may prohibit a sale of part or all of the Disco shares held by Ahold and, if so, will need to be addressed prior to closing," Ahold said in a statement.
Cencosud will pay around $315 million for Disco, whose sales in 2003 were around €708 million.
Disco is just the latest Ahold unit to change hands as part of the Dutch group's widespread restructuring programme. The Santa Isabel unit in Chile was sold last year to Cencosud, while part of the Brazilian business went to Wal-Mart last week and smaller unit in Peru was disposed of in December. Ahold still has a small Paraguayan unit to sell, as well as the remainder of its Brazilian stores (thought to be of interest to local market leader CBD).
The restructuring was announced before revelations of accounting fraud in 2003, but has become all the more important as a result, with the company needing to fill a €1 billion hole in its accounts. Disco was one of the Ahold units investigated in relation to the fraud, and the company will certainly be glad to see the back of a company which has been a perennial problem.
