Hakon Agrees to Buy ICA Stake From Ahold for $3.1 Billion

Hakon Invest AB, the minority owner of Sweden’s largest food retailer ICA, agreed to take full control by acquiring partner Royal Ahold NV’s 60 percent stake for 20 billion kronor ($3.1 billion).

The purchase will secure Hakon’s future ownership of the 2,215-store chain and clarify ICA’s ownership structure, the Solna-based buyer said today in a statement. For Ahold, the owner of Albert Heijn stores in the Netherlands and Stop & Shop in the U.S., the disposal represents one of the last steps in reversing its acquisition strategy of the previous two decades.

Hakon rose as much as 18 percent in Stockholm trading to the highest in six years, while Ahold jumped as much as 6 percent in Amsterdam, the steepest gain since November 2009. The price is “very positive” for Amsterdam-based Ahold and will result in a tax-free capital gain of about 900 million euros ($1.2 billion) that should go direct to shareholders, according to James Anstead, an analyst at Barclays Plc in London.

Today’s deal marks the conclusion of a five-month review by Ahold of its stake in ICA, which it has owned jointly with Hakon since 2000. While owning 60 percent of ICA’s shares, the Dutch retailer only controlled 50 percent of the voting rights. It said in September that it was exploring alternatives for the stake, including an initial public offering. Hakon, which is controlled by ICA franchisers, had the right of first refusal.

“We think it’s the right deal for our shareholders at this time,” Ahold Chief Financial Officer Jeff Carr said on a conference call today. “ICA as a business is doing really well and that’s reflected in the price of this transaction.”

Shares Gain

Should anything “go wrong in the transaction,” an IPO of the stake is “something that we could fall back onto and it’s something we will continue to look at,” Carr said.

Ahold, which was on the brink of bankruptcy a decade ago partly due to overstating its revenue from the ICA venture, is selling because it wants to focus its expansion on businesses it controls. The retailer isn’t disclosing the value of its capital gain on the sale, spokesman Jochem van de Laarschot said.

Ahold rose 4.3 percent to 11.06 euros at 11:20 a.m. in Amsterdam, valuing the company at 11.7 billion euros.

Hakon, which was formed in 2000 after Ahold bought into ICA, said it will finance the purchase with cash and bridge financing. Hakon will later repay the debt via a share issue of about 5 billion kronor. Ahold will also get a 1.2 billion-krona dividend payment from ICA, the grocer said in a statement today.

‘Simpler Structure’

“We gain a simpler structure and a greater resolve in the organization,” Hakon Chief Executive Officer Claes-Goran Sylven said in a statement. Due to the bridge financing and subsequent share issue, Hakon said it won’t pay a dividend this year.

Hakon shares were up 16 percent at 155.8 kronor at 11:25 a.m. in Stockholm, heading for the highest close since 2007.

ICA had sales last year of 96.9 billion kronor, according to Ahold. The business also operates Rimi stores in Norway and the Baltics. After completion of the deal, Hakon will change its name to ICA Gruppen and Per Stroemberg will be its CEO.

Ahold Chief Executive Officer Dick Boer has expanded Ahold by buying online retailer Bol.com, adding C1000 and Jumbo stores in the Netherlands and acquiring Genuardi shops in the U.S. The executive said in November 2011 that he will open a minimum of 50 supermarkets in Belgium in the next five years, while the company aims to triple online sales to 1.5 billion euros.

The Dutch retailer will probably return most or all of the sale proceeds to shareholders as the company is “broadly in-line” with its targeted leverage ratios, said John Kershaw, an analyst at Exane BNP Paribas in London.

Sale Funds

Ahold will say more on what it will do with the sale funds closer to the completion date, CFO Carr said on the call. “I won’t speculate at this moment on the potential use,” he said.

The transaction will have no direct impact on the joint activities of ICA and Ahold in areas such as sourcing and responsible retailing, Ahold said. ICA will not be shown as discontinued operations in 2012, Carr said on the call.

Hakon Chairman Hannu Ryopponen was chief financial officer at Ahold until 2005, when he left to join Finnish paper company Stora Enso Oyj. Ryopponen and then-CEO Anders Moberg revived the food retailer by selling more than 30 businesses and slashing debt. Ryopponen was elected Hakon Chairman in April 2012.

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