Royal Ahold chief considers selling new shares

ZAANDAM, NETHERLANDS — ZAANDAM, Netherlands - Royal Ahold NV's new chief executive officer is considering selling new shares to current investors to trim the Dutch retailer's debt load and may announce a decision next month on how he plans to raise funds.

The retailer, which must show creditors its 2002 accounts by Sept. 30, "will try to move fairly quickly" on financing after that deadline, CEO Anders Moberg, who was appointed Thursday, said in an interview at the company's headquarters. "We have a very stressed situation."


In February, the owner of two Maryland companies, Giant Food of Landover and Columbia-based U.S. Foodservice, said it had overstated its profit, causing its shares to lose 63 percent in a day. Moberg, a former executive at Swedish furniture company IKEA and Home Depot Inc. of the United States, is trying to craft a new strategy and pay down some of the retailer's 11 billion euros ($12.2 billion) of debt.

The 53-year-old Swede said he will work to cut borrowings, make "significant disposals" and turn Ahold into "one company and not a loose federation." Moberg, whose office overlooks a row of Dutch wind turbines, said he will be "more conservative" than his predecessor.


"It's a big threat for the company if we haven't got the structure of our balance sheet right. You don't get to decide your options anymore" when strapped for cash, he said. "I'm probably somewhat more conservative than people who have been here in the past."

The retailer's previous chief executive, Cees van der Hoeven, who oversaw $19 billion in acquisitions, was ousted in February after Ahold disclosed the overstatement. The company estimates that it inflated earnings by about 970 million euros over three years.

"I don't think it could have ever happened at a company like IKEA or at Home Depot," Moberg said. "I would like to get the company back in shape so we know where we are and we can go from there."

To raise cash, the company is considering varying combinations of financing plans, including selling shares to current shareholders, Moberg said. He declined to comment on when such a sale might take place, or how much it might raise.

Ahold should sell 5 billion euros' worth of shares to current holders, said Han van Lamoen, an analyst at FBS Bankiers NV.

"You'd have share dilution from here to Tokyo, but on the other hand, you'd have 5 billion euros," said Van Lamoen, who has a "sell" rating on Ahold shares. A rights offer "is harsh, but we have seen that you have to go for the tough measures to get the company going again."

Ahold's shares rose 17 cents, or 1.9 percent, to 9.16 euros in Amsterdam. The shares have lost about 5.7 percent of their value since Feb. 21, the last day of trading before the company announced the profit overstatement. Ahold's U.S. shares jumped 44 cents, or 4.5 percent, to close at $10.24.

Moberg said he intends to reduce debt to a level where the company will be able to get "reasonable prices in the credit market." He declined to give an amount, saying he expects to present a plan for financing to shareholders at a meeting in the third week of October.


The company must pay back a loan worth 678 million euros by the end of this month, which it has said it plans to do with existing cash. Ahold has until February to renegotiate a 2.65 billion-euro credit line to a group of banks.

Moberg said he plans to focus the company on running supermarkets in Europe and the United States. That means the company may shrink before it can grow again, he said. Ahold should dispose of operations in Eastern Europe and Spain, analysts have said.

Ahold will try to reduce costs by negotiating global contracts with suppliers and trying to meet customers' demands for lower prices. The company also plans to sell more products under its own brands.

Transforming Ahold, bringing together "a lot of kingdoms with a lot of freedom," and trimming debt may take as much as three years, according to Moberg.

"It's very much a different mindset that I'm coming with than they've had in the past," Moberg said.