Friday, December 10, 1999
- 'The newly announced joint venture between Royal Ahold and the ICA Group will considerably strengthen our European position. This is one of the most sizeable transactions in our history. The partnership will have an immediate positive impact on net earnings and earnings per share in 2000 which will continue,' said Cees van der Hoeven, President & CEO of food retailer Royal Ahold at a press conference today at corporate headquarters in The Netherlands.
With net sales of $6.7 billion, the ICA Group is Scandinavia's largest food retailer. Van der Hoeven talked the assembled media representatives through the transaction and confirmed that Ahold is to pay $1.8 billion for its 50% stake in the ICA Group. Ahold will finance the transaction in line with its funding policy which may include an equity issue. Details of the financing plan will be announced after the final contract is signed, anticipated for the end of January 2000. The transaction is expected to close by mid-year.
At the press conference, Van der Hoeven reiterated that Ahold continues to grow profitably through autonomous growth of at least 7% per annum, smaller and fill-in acquisitions, and through large regional acquisitions or joint ventures such as the one announced with the ICA Group. Commenting on Ahold's US business, Van der Hoeven said fourth-quarter sales there are robust and may well exceed expectations once again. 'We're flying!,' he enthused. 'Our US customers love shopping with us.' He also commented favorably on the announcement by Schuitema, the Dutch food wholesaler in which Ahold has a 73% stake, that it has reached initial agreement with the Dutch branch of German food retailer Tengelmann to acquire all of its 125 supermarkets and six hypermarkets in The Netherlands that trade under the A&P store brand.
Ahold-ICA Group: 'a magnificent fit'
'The ICA Group and Ahold are a truly magnificent fit', said Van der Hoeven. 'We see many synergy opportunities and benefits from economies of scale. We will pool our resources and make the already substantial Scandinavian operation even better and more competitive. In 2001, we anticipate synergy savings of approximately $35 million, that's about 0.5% of total 1999 ICA group sales'. These savings come on top of the synergies to be generated by the January 1999 merger between Sweden's ICA Handlarnas AB and Norway's Hakon Gruppen AS that formed the ICA Group.
Van der Hoeven mentioned specifically the growth potential he envisions for the Maxi hypermarket format and the Rimi soft discount stores in Sweden and Norway. Positive developments were also likely in the larger Scandinavian cities, where the ICA Group still has significant room to broaden its base. He also referred to the potential of the 1,500 Statoil gasoline stations, 50%-owned by the ICA Group. 'They too have great opportunities. We look forward to contributing the know-how and experience we have gained from operating similar activities in The Netherlands and the United States. Increasingly, we will help turn these strategically located gasoline station stores into popular venues for convenience shopping.'
After completion of the ICA Group transaction, Ahold will generate European sales of approximately $19 billion and worldwide sales of about $41 billion, improving its ranking in the top league of global food retailers. Ahold will release full-year 1999 results on March 7, 2000.
Closing the press conference, Van der Hoeven confirmed that more transactions are in the works and that Ahold definitely plans to meet its objective of becoming the world's best and most successful supermarket company.