ING analysts Peter Brockwell and John David Roeg think there is a “compelling strategic logic” for a deal.
The pair say buying Ahold’s established U.S. business would be a way of quickly turning round Tesco’s fledgling, and loss-making, business Fresh & Easy, with Tesco funding a deal with cash, shares and disposals.
A tie-up with Ahold would also make sense for domestic rival Delhaize, although given that Ahold is twice its size, any transaction would have to be a stock-based merger, they add. Most other potential predators lack the necessary financing, a strategic rationale to do a deal, or synergies, the ING team reckons.
From the note:
“Ahold’s substantial undervaluation could trigger a takeover.
“We see three possible scenarios: (1) nothing happens, the undervaluation persists; (2) management tries to reduce the gap through more ambitious growth targets/capital restructuring; or (3) predators could eye Ahold’s quality assets.