Ahold splits ICA acquisition

Related tags Retailing Ahold

Ahold has reached an agreement with its Scandinavian joint venture
partner ICA Förbundet over the acquisition of a 20 per cent stake
in the ICA AB retail unit previously owned by the Norwegian firm

The three companies were partners in the ICA AB retail venture until Canica decided earlier this year that it wanted to dispose of its stake. Under the terms of the joint venture agreement, the shares were offered first to ICA Förbundet, but when that company declined to purchase them, Ahold found itself obliged to buy the shares - at a possible price tag of €1 billion.

The enforced purchase of the shares could not have come at a worse time for the Dutch retailer, which is battling to restore its credibility (and its credit rating) after a fraud scandal at its US Foodservice division. A programme of widespread disposals has helped ease some of the pressure - and replenish the coffers - but Ahold's position is still far from secure, meaning that an enforced acquisition, especially with such a high price tag, was unlikely to be welcomed.

But some of the pain has undoubtedly been taken out of the purchase by reaching an agreement with ICA Förbundet. Under the terms of the agreement, Ahold and ICA Förbundet will effectively split Canica's shares between them, with Ahold making the initial purchase of the 20 per cent stake and its partner then acquiring 10 per cent from the Dutch retailer - a move which will help alleviate some of Ahold's debt burden.

This will leave Ahold with 60 per cent of ICA AB and ICA Förbundet with 40 per cent.

The deal also includes the dropping of another put option which would have left Ahold obliged to buy ICA Förbundet's shares in the joint venture if the retail association decided to dispose of its stake.

As for the thorny issue of purchase price, Ahold said that it could not yet determine the cost of the deal because of the complicated nature of the transaction. "At this time, Ahold does not know how much it will pay for Canica's 20 per cent stake in ICA AB or how much it will receive from ICA Förbundet for the shares that ICA Förbundet will purchase from Ahold,"​ the company said in a statement.

The cost is related to the revised equity value of ICA AB - in other words, the fair market value of its shares at the date of exercise if ICA AB were listed on the Stockholm Stock Exchange - a figure yet to be determined. This figure will also determine how much ICA Förbundet pays Ahold for its 10 per cent stake, the company said.

Ahold and Canica remain at loggerheads over the price of the 20 per cent stake, with the Norwegian group holding out for €1 billion while Ahold has estimated its value at nearer €840 million. The value of the shares will be decided by a Swedish arbitration court.

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