Fitch: Ahold must simplify before considering mergers

Fitch Ratings said a simplification of Koninklijke Ahold NV's (BB/positive) structure is a prerequisite before it considers any potential merger.

The agency's comment comes after the appearance of market rumors that suggest Ahold and Delhaize, both Europe-based supermarket operators with substantial U.S. operations, are pursuing a merger and that Ahold's U.S. Foodservice operation could be sold. The push for a break-up is prompted by shareholder activism.

Simplifying the business has long been part of the Ahold management team's strategy. In the past, Ahold faced financial problems because of a lack of control on its overseas activities due to the complexity of its organization, Fitch said. Since then, the new management team has pursued its "Road to Recovery" program, aimed at deleveraging and strengthening its U.S. Foodservice and retail operations. The group has progressed with its disposal program, but Fitch said the recovery of its U.S. Foodservice is still a long process.

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