Supermarket company Koninklijke Ahold has announced today (Monday) that it has reached an agreement with the lead plaintiffs to settle the securities class action entitled “In re Royal Ahold NV Securities & ERISA Litigation”, which is pending before the United States District Court for the District of Maryland, linked to an overstatement of profit in 2003.
Ahold also today announced that it has reached an agreement to settle litigation with the Vereniging van Effectenbezitters (VEB) (Dutch Shareholders’ Association).
“We are pleased to have reached these settlements covering all qualifying shares worldwide on an equal basis,” said Peter Wakkie, member of the Ahold executive board and chief corporate governance counsel. We have attempted to make fair restitution without endangering the continuity of the company or its business strategy for the coming years. We will avoid lengthy, costly and time-consuming litigation,” he said. “The company can now move forward and focus entirely on its business.”
Under the terms of the agreement in the securities class action, the lead plaintiffs in the securities class action agree to settle all claims against Ahold in the securities class action for the sum of US$1.1bn (EUR 945 million). The settlement covers Ahold, its subsidiaries and affiliates, the individual defendants and the underwriters.
The settlement is worldwide and applies to all qualifying common shares of Ahold. The term “qualifying shares” refers to all those common shares which were purchased between 30 July 1999 and 23 February 2003. According to preliminary calculations made by Ahold, the settlement amount, after deduction of plaintiffs’ attorneys’ fees, compensation in the amount of US$9m to (an entity designated by) the VEB for facilitating the global settlement and administrative expenses, would yield a pre-tax amount of approximately US$1.00 to 1.30 per qualifying share. US and non-US holders of qualifying shares will be treated equally under the agreement.
Ahold will contribute to the settlement fund, from which the qualifying shares will be paid, in two instalments: two thirds of the settlement amount will be funded into escrow within three business days following preliminary court approval of the settlement by the District Court of the District of Maryland, which is expected as early as January 2006, and the remaining one third will be funded into escrow within six months following final court approval of the settlement.
The agreement will be subject to approval of the District Court of the District of Maryland. If holders of more than 180m shares opt out of the settlement (i.e. do not wish to be bound by the settlement), then Ahold will have the right to terminate the agreement and recover the funds paid, other than those amounts spent on notice of the settlement.
Under the terms of the agreement between the VEB and Ahold, the VEB has agreed to terminate the proceedings before the Enterprise Chamber of the Amsterdam Court of Appeals with respect to the annual financial statements of the Company for the years 1998, 1999, 2000, 2001 and 2002. In consideration of the withdrawal of such proceedings and as compensation of costs incurred, Ahold shall pay the VEB an amount of EUR2.5m (US$2.92m)
In addition, as part of its commitment to contribute to and facilitate the global settlement, the VEB has agreed that following the publication of the report by the investigators in the so-called inquiry proceedings before the Enterprise Chamber of the Amsterdam Court of Appeals, it will not pursue any further legal action in those proceedings and it will not commence or support a proceeding for damages in any court.
Ahold will recognize a provision in the amount of EUR896m in the third quarter of 2005, resulting in an after-tax charge in the amount of EUR585m in the third quarter. Ahold expects to receive an amount of approximately EUR100m from insurance proceeds. This amount will not be recognized in the third quarter of 2005. Ahold will be funding its contribution to the settlement fund out of its available cash balances.