Ahold has announced its intention to divest its operations in four South American countries – Argentina, Brazil, Paraguay and Peru – in order to concentrate on its mature and most stable markets and to generate funds to pay down debt.
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Ahold, which is already in negotiations to divest its holdings in Chile, has been hit by an accounting scandal since the end of February when it announced that accounting irregularities at its US Foodservice unit had led to earnings being overstated by US$500m.
The retailer said that no timing has been set for any specific divestment as Ahold is determined to negotiate transactions that maximise value. Ahold said it intends to withdraw from the South American market in a responsible way with respect to its customers, associates and suppliers.
In Brazil, Ahold plans to sell its three wholly-owned operations: Bompreço, G. Barbosa and Hipercard. Ahold first entered Brazil in 1996. Operations in Brazil are profitable and unaudited net sales in 2002 reached an estimated €1.3bn (US$1.4bn) generated through 119 Bompreço and 32 G. Barbosa supermarkets and hypermarkets at year-end.
In Argentina, Ahold intends to divest its wholly-owned subsidiary Disco, once the 2002 annual accounts have been signed off. Ahold entered the Argentine market in 1998. Unaudited 2002 net sales reached an estimated €762m, generated through 236 stores at year-end. The turbulent economic circumstances in the country in recent years have led to a marked erosion of buying power across all income groups. Despite the regional slowdown, Ahold maintained that Disco is a strong competitor with substantial market share.
In Peru, despite the double-digit growth of its business, Ahold views the scale of the operations as small. Given the company’s intended withdrawal from its major South American markets, Ahold plans to exit this market as well. Unaudited 2002 net sales reached an estimated €243m, generated through 32 supermarkets and hypermarkets at year-end.
In Paraguay, Ahold plans to sell its 10 stores that generated unaudited 2002 net sales of €36m.
