Dutch retail group Ahold has announced it would purchase its own shares for some two billion euro. The distributor is sitting on a pile of money, after selling Scandinavian group ICA.
Extra purchase thanks to Scandinavian divestment
Earlier this year Ahold sold 60% of its participation in Scandinavian sector colleague ICA to co-owner Hakon Invest for 2.5 billion euro. The sales had been taken into account: in 2012 Ahold had already decided to leave ICA when it could not get complete control of the chain.
A number of analysts already expected Ahold to use that money to buy its own shares. A drop of the number of shares in circulation causes future profits to be divided among less titles, causing the other shares to rise in value. At the same time however chances for a major takeover diminish significantly. Some analysts believed Ahold was planning on taking over American retailer Harris Teeter, but that has become unlikely now.
Most analysts expected Ahold to reserve 1 to 1.8 billion euro for the purchase. In February of this year Ahold already announced a buyback of its own shares for about 500 million euro spread across about 12 months. In the end the number is even higher: before the end of 2014 Ahold will buy back two billion euro of its own shares. This would mean that the company would be buying about a sixth of its own value.