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Dutch raid U.S. larder
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March 7, 2000: 11:06 a.m. ET
Ahold offers $3.6B cash for U.S. Foodservice to revive international push
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LONDON (CNNfn) - Royal Ahold announced plans Tuesday to acquire U.S. Foodservice, the second-largest food distributor in America, for $3.6 billion to extend the international reach of the acquisitive Dutch retailer and food firm.
Ahold is offering $26 a share in cash for U.S. Foodservice, a company which generates annual sales of $7 billion and employs 13,250. The offer represents a 42 percent premium over Foodservice's (UFS: Research, Estimates) close Monday of 18-1/4. Ahold will also assume $925 million in debt.
The Dutch company aims to complete the purchase by May and expects the acquisition to generate cost savings of $75 million by next year. It will raise the funds for the purchase by selling about 3 billion euros worth of shares and related instruments.
The friendly deal revives the U.S. expansion plans of Ahold, the world's sixth-largest supermarket company. It dropped plans last year to acquire U.S. Pathmark Stores for $1.7 billion after U.S. regulators required it to sell almost half of the target's assets. Ahold has extensive operations with 3,600 stores in Europe, Asia and Latin America, though it already generates almost half its sales in the U.S. market.
Competition is heating up the European retailing sector as Wal-Mart expands in Europe. Ahold bought Sweden's ICA supermarket company in December, 1999.
Ahold also said Tuesday it had been invited to join the global Internet-based purchasing operation being spearheaded by Oracle (ORCL: Research, Estimates) alongside France's Carrefour {PAR:PCO] and Sears, Roebuck (S: Research, Estimates).
Ahold shares were 0.7 percent higher at 23.70 euros in afternoon trading in Amsterdam, recovering from an earlier 4 percent fall following the announcement of the acquisition.
The retailer announced the deal alongside a 37 percent rise in net earnings for 1999 to 752.1 million euros ($721 million) from 547 million a year earlier, ahead of the 737 million consensus among analysts surveyed by Reuters. Sales rose 27 percent to 33.6 billion euros.
Its Latin American unit posted a 65 percent rise in sales last year following expansion in Argentina. U.S. sales climbed 26 percent while operating earnings in the region jumped 40 percent to 1 billion euros. 
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Ahold
U.S. Food Service
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