Ahold buys Monarch - Brief Article

Eurofood, August 31, 2000

Dutch supermarket giant Royal Ahold has further expanded its activities in the US, with the US$1.57bn (1.74bn [European Dollar]) acquisition of PYA/Monarch from the Sara Lee Corporation. The deal, which took place through Ahold's US subsidiary US Foodservice, increases Ahold's size in the US as well as pushing its presence into the southeast. Monarch currently supplies over 38 000 food and non-food items to around 40 000 customers, although it leaves Ahold significantly smaller than Sysco, the US market leader.

The acquisition will reunite Ahold's current US business, US Foodservice with PYA/Monarch, as the two companies were previously one until a management buyout by US Food service in 1989. US Foodservice was then bought by Ahold which agreed to absorb its debts, in a US$3.6bn deal during March this year (see Eurofood, 16 March 2000, p5). Ahold believes the acquisition is a great move, claiming both companies have similar management styles and philosophies, and both operate with similar infrastructures. The Dutch firm also projects 2001 sales in the US to reach US$12bn following the acquisition. The deal also fits in with Sara Lee's strategy of refocusing on its core businesses.

IN LINE WITH GROWTH STRATEGY

Ahold president and CEO, Cees van der Hoeven, said the deal is "fully in line with our international growth strategy and with Ahold's ambition to become the world's best multi-channel food provider". The company expects to yield overall synergy savings of some US$30m, rising to US$60m the following year. Chairman of Ahold USA, Bob Tobin, said he was very pleased and that the "acquisition is a perfect fit". PYA/Monarch is a large food service provider in the US with annual sales of around US$3bn, operating 15 distribution centres with 4 850 staff. Monarch supplies a varied customer base, including restaurants, health care institutions and hotels. Ahold, the Netherlands' biggest and the world's sixth largest supermarket chain, has been active in the US since 1977 and generates over half of its profits in the US. The company currently operates a total of 7 000 supermarkets around the globe with global sales of over US$50bn.

MEANWHILE IN THE NETHERLANDS

Ahold has also announced that back in its native country, another subsidiary Etos has acquired the UK-based Boots drugstores, thus expanding Ahold's portfolio. The Boots outlets will be absorbed into the Etos chain, but Boots products will remain on sale in the Netherlands through Etos stores. Ahold acquired Etos in 1974 and the firm has more than doubled in size in terms of both size and sales.