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August 18, 2006
Hedge Funds Push for Retailer Breakup
Two hedge funds that own a 6.4 percent stake in the Dutch food retail company Ahold are pushing for the breakup of the retailer. Paulson & Co. Inc. and Centaurus Capital are looking to reconstruct Ahold after dismantling and disposing of its U.S. assets. Their focus is on the European market; the funds claim that this move could raise the market value of the retailer from the current 11 billion euros to 14 billion euros.
John Paulson, director and founder of Paulson & Co., said in an interview with Reuters that there were companies interested in buying out the U.S. operations of Ahold. The two hedge funds are hoping to thrash out the issue with shareholders and management.
Paulson claims that retail business in the U.S. is significantly different from what it is in Europe, which is why Ahold should concentrate on its Dutch unit which generates the most profits. But the retailer will have to forego at least two-thirds of its sales if it were to cease operations on U.S. soil. Of its sales total 10.5 billion euros, 7.6 billion is generated from sales outside Europe.
In this situation, does Paulson’s and Centaurus’ bid make sense? The hedge funds have retained the legal services of ING Corporate Finance for the entire operation.
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