Buyout battle for Ahold unit heats up

By Michael Flaherty

NEW YORK, March 8 (Reuters) - Several private equity teams, including a group made up of Bain Capital, Blackstone Group, and Wellspring Capital Management, have bid for the U.S. supply unit of Dutch food company Ahold NV (AHLN.AS: Quote, Profile, Research, Stock Buzz) sources said on Thursday, in a deal that could fetch more than $6 billion.

Sources close to the process say that a team of Clayton, Dubilier & Rice (CD&R) and Kohlberg Kravis Roberts & Co. also bid for the unit, called U.S. Foodservice.

Buyout firm Thomas H. Lee Partners is also in the process, but sources say it is unclear who it is teamed up with. First round bids are in, sources say.

Amsterdam-based Ahold, the world's fourth-biggest food retail and food service group by sales, is struggling to get back on track after an accounting scandal in 2003 centered on U.S. Foodservice, which is seen as having few synergies with Ahold's core retail activities of running grocery chains.

U.S. Foodservice, which has 27,000 employees and 70 distribution centers throughout the United States, delivers food to retailers as large as McDonald's Corp. (MCD.N: Quote, Profile, Research, Stock Buzz) and as small as neighborhood delis. The business is based in Columbia, Maryland.

Sources said that JPMorgan (JPM.N: Quote, Profile, Research, Stock Buzz), the investment bank running the auction, is offering buyers a debt financing package of 7.5 times the company's earnings before interest, taxes, depreciation and amortization, a measure of cash flow. Analysts estimate U.S. Foodservice's 2007 EBITDA to be in the range of 453 million euros to 475 million, or around $600 million.

Assuming that the private equity firms pay at least 25 percent in cash for the company, that could put an estimated price tag on a deal of at least $6 billion.

Buyers can opt out of the financing JPMorgan is offering, and as in any auction, there is no guarantee of a sale.