El Corte Inglés lining up Ahold takeover?

Reports in the Spanish press suggest that El Corte Inglés, which is already present in the food retail sector through the Hipercor chain, is prepared to pay €480 million for Ahold's business, which includes the Supersol and Hiperdino fascias.

Ahold's Spanish business is unlike most of the other operations it has sold off (in Latin America and Asia, primarily) in that it has very little homogeneity, and is made up of a number of regional food retail businesses acquired over a period of several years.

In 1999, the group bought Eco Avila and Longinos Velasco in Madrid, as well as Dialco in Seville (Cobreros fascia), and Dumaya and Castillo del Barrio in Málaga. It also added Guerrero in Granada and Las Postas and Mercasol, two smaller chains based in Marbella on the Costa del Sol.

In January 2000, Ahold acquired Kampio, a regional supermarket chain in Catalonia with 39 large supermarkets, extending its Spanish base from Madrid and south eastwards. In the following year, it added the Superdiplo chain, with stores on the Canary Islands, in southern Spain, Andalucia and the greater Madrid region.

Ahold has focused on giving its various supermarket businesses a more unified identity over the last few years - converting many stores to the Superdiplo or Supersol fascias - and has said that it does not plan to sell off the unit in a piecemeal fashion. Whether a potential buyer would want the whole business, however, remains to be seen, and there is a distinct possibility of an eventual splitting up of the business.

For example, Spanish newspaper Expansion​ said El Corte Inglés was primarily interested in Ahold's Canary Islands chain, which accounts for 45 per cent of the Dutch firm's total Spanish business. Ahold is the market leader on the islands with a 27 per cent share, operating both supermarkets (Supersol) and hypermarkets (Hiperdino) there.

While the Spanish chain has denied any interest in the business, it has made no secret of its plans to expand its operations this year. Whether the supermarket focus of the Ahold unit would fit well with El Corte Inglés' existing portfolio, centred as it is on large stores, is questionable.

That said, growth in the supermarket sector has been much greater than that seen for hypermarkets, due to a loophole in planning laws which allows smaller supermarket developments to dispense with the reams of red tape, and the wide geographic spread of the business could give a relative newcomer to the market such as El Corte Inglés a major foothold.

Both Ahold and El Corte Inglés are top ten players in the Spanish food retail sector, according to data from M+M Planet Retail​ . ECI's food sales of around €3.9 billion made it the number four player in 2003 with a food retail market share of 9.2 per cent, while Ahold is the number eight group with sales of €1.9 billion and a share of 4.5 per cent.

Combined, the groups would overtake Eroski to become the third largest food retailer in Spain, according to M+M Planet Retail data, although both Mercadona (market share of 15.5 per cent) and Carrefour (22 per cent) would remain ahead of it.

There are more likely candidates for the Ahold operations, however, with French giants Carrefour and Auchan both thought to be interested (though whether bids from such major - albeit hypermarket-focused - operators would pass the competition regulators is unclear) as well as local retail groups Eroski (looking for new opportunities in the supermarket sector after ending its joint venture with Consum) and Caprabo (the Catalan group looking for further acquisitions to broaden its nationwide presence after buying Valencia-based chain Enaco and Madrid chain Alcosto).

The Expansion​ report also suggests that venture capital groups Apax and Permira are still in the running, although another financial bidder, CVC Capital Partners (which already owns the El Arbol chain in Spain) is thought to have been ruled out after its offer was designated as too low.