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Ahold has reached an agreement to sell its Bi-Lo and Bruno’s chains in the southeastern US to Lone Star Funds, a private investment group, for about $550 million.

The sale is expected to close during the first quarter of 2005; if the chains meet certain performance targets, Ahold could be in line to receive an additional $100 million.

The move by Ahold has been part of its strategy of getting rid of what it perceives as non-core businesses as it tried to recover for the accounting scandal that soiled both the company’s reputation and balance sheets. It leaves the company with its Stop & Shop/Giant-Landover and Giant-Carlisle/Tops divisions in the US.

In a prepared statement, Ahold CEO Anders Moberg said, “This divestment comes at the end of a year of transition for Ahold and marks a major milestone along our Road to Recovery. Divesting Bi-Lo and Bruno's is part of our strategy to optimize our portfolio and strengthen our financial position by reducing debt. Our US retail business will be fully focused on our other prominent supermarket operations, Stop & Shop/Giant-Landover and Giant-Carlisle/Tops. We committed ourselves to a caring and careful divestment of BI-LO and Bruno's in the best interests of our associates and shareholders.”

Analysts, while approving of the sale, noted that it came with a lower price tag than was expected.

Lone Star Funds, based in Dallas, Texas, is a leading U.S. private investment company that manages more than $13 billion.
KC's View:
Lone Star may manage $13 billion in investments, but does it know how to help a food retailer be both a market leader and a thought leader? Because that’s the kind of commitment necessary to survive in the food business…

The better question is what’s going to happen to these stores and these employees now. Is Lone Star willing to invest in them to make Bi-Lo and Bruno’s compelling shopping experiences that can compete effectively in a tough environment? Or will it start cutting staffing levels, reducing inventory, selling off assets, while diminishing the company’s competitive abilities and the morale of the people who work there.

The so-called Road to Recovery has many off-ramps. Some lead to prosperity, some to oblivion and ignominy.