- Rumors that Tesco plans to bid the equivalent of $15.75 billion (US) to acquire Ahold seemed to catch fire yesterday, as numerous British newspapers reported that the British’s company was preparing to make a move on the embattled Dutch retailer.
There was one report that Tesco marketing director Tim Mason and finance director Andrew Higginson were assessing the company, with instructions to report back to CEO Sir Terry Leahy later this week.
There were varying reactions to these rumors and reports. Tesco management said it was “surprised” by them, and analysts debated whether Ahold would be sold off as a whole entity, or whether it would sell off peripheral businesses to raise cash. (The latter seemed to be the more likely scenario.) - Reuters reports this morning that Dutch regulators believe that Ahold did not "materially" breach disclosure rules when it announced its accounting problems and the forced resignations of its CEO and CFO last week. There have been questions about whether Ahold held off too long in making the disclosures; the investigation, however, continues and could take several months.
The conclusions of the investigation could determine how liable Ahold is in any subsequent lawsuits against the company, which could, of course, have an enormous economic impact on its operations. - Reuters reports that Nestle SA CEO Peter Brabeck has said that despite Ahold’s troubles, and despite that Ahold is Nestle’s third biggest customer (after Wal-Mart and Carrefour), he has not “seen anything to worry about" in terms of his own company’s exposure. While he said Nestle is reviewing all its contracts with Ahold companies, no immediate problems have come to light.
As reported last week, the Netherlands-based retailer revealed accounting irregularities that consisted of an overstatement of revenues in the neighborhood of a half-billion dollars. Its CEO and CFO were forced to resign, and the company is dealing with a myriad of legal issues.
- KC's View:
- While the idea that Tesco might step in and make a bid for Ahold appeals to us just because it has a sense of the dramatic, we’re dubious that it will be as simple as all that. We’re not convinced that this is how Ahold’s board will want to deal with the situation; besides, a bid by Tesco would only open up the situation so that bids could be made by any other company that wanted a piece of the Ahold pie. You think the Safeway Plc bidding situation is a mess? An Ahold bidding war would make it look like a walk in the park.
