Dutch grocery store operator
agreed Tuesday to buy
in an all-cash deal valued at $2.7 billion, or $26 a share.
That price represents a 42.5% premium over U.S. Fooodservice's closing price on Monday.
Speculation about a pending deal has fueled a rise in U.S. Foodservice's stock price for the past two weeks, from its Feb. 22 close of 11 7/8 to Monday's close of 18 1/4.
Shares of Royal Ahold gained 3/16, or 1%, to 23 1/16 in morning trading, while U.S. Foodservice shares gained 6 3/4, or 37%, to 25, just shy of the tender price.
Royal Ahold currently operates five grocery store chains in the U.S., including
Giant Food Inc./Giant Food Stores
. The company's stock price has slid from a 52-week high of 41 3/4 to Monday's 22 3/4 opening.
"The restaurant's share of the food dollar is taking share away from food at home," said Rajan A. Chaudry, analyst for
Credit Suisse First Boston
. "Supermarkets are looking toward prepared foods." Chaudry rates U.S. Foodservice a hold and does not cover Royal Ahold. His firm has done no underwriting for either company.
U.S. Foodservice, with 13,250 employees, distributes prepared foods to more than 140,000 restaurants, hotels, cafeterias, schools and hospitals.
Chaudry said U.S. Foodservice's foundering stock price has made growth difficult. The price fell to the low teens after analysts downgraded the stock on Feb. 1, and it did not rise again until the merger speculation began.
"This deal may give them the capital to fuel acquisitions," he said.
Royal Ahold said it plans to finance the deal with half equity and half debt. Under the terms of the proposed merger, the company would absorb $925 million of U.S. Foodservice's debt.
The tender offer, approved by the Maryland company's directors Tuesday, will begin March 13 and last for two weeks. The deal will only close if Royal Ahold is able to buy a majority of the shares and obtain regulatory approval.