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Ahold Having Second Thoughts About Hema Purchase

Published on Nov 17 2010 8:41 AM in Retail

Ahold Having Second Thoughts About Hema Purchase

International retail giant Ahold, who last month showed keen interest in purchasing Dutch department store chain Hema, are now said to be having doubts over the deal. The Dutch newspaper Het Financieele Dagblad reported that they are questioning whether the price is right, and are concerned about the reaction of shareholders should the deal go ahead.

The asking price has been a point of contention for many interested buyers. British private equity groups CVC Capital Partners and BC Partners have said that Lion Capital are seeking €1.5 billion for Hema, a price too costly for most. While Ahold have a cash pile of over €2 billion, all other interested parties have now backed out of the deal, leaving them wondering whether such a move would be wise.

Shares in Ahold were down 0.2% at €9.76 yesterday, and analysts have speculated that the deal could potentially ruin the company. “We believe Hema’s model remains too far away from Ahold’s model and thus includes too many (operational) risks to become positive about a takeover” said SNS securities analyst Richard Withagen. While Ahold have expanded their catalogue to include non-food items, groceries are still their main focus - unlike Hema, who sell clothes, appliances, and other consumer items.

Hema, which has 500 stores throughout Germany, Belgium, and France, turned over €1.1 billion last year, but with debts of €1 billion, it’s easy to see why Ahold may have doubts.

It’s a significant change from last month, however, when a reported six companies were bidding for the chain. Ahold’s Chief Executive, John Rishton, said he was still looking for potential acquisitions, citing Great Atlantic & Pacific as a possibility. Last December, the company also said it would buy 25 stores in the US from Ukrop’s Supermarkets, a deal worth $140 million. Hema is the second Dutch company to be up for sale this year, after Maxeda sold its department store chain V&D and La Place restaurants to Sun European Partners. (17 Oct)© 2010 - ESM: European Supermarket Magazine 

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