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AMSTERDAM, the Netherlands - Royal Ahold NV, the world's fourth-largest food retail and foodservice group in sales and the parent company of Ahold USA, said today that it has come to an agreement with the lead plaintiffs to settle a securities class action, In re Royal Ahold N.V. Securities & ERISA Litigation, which was pending before the U.S. District Court for the District of Maryland in Baltimore.
Ahold additionally noted that it has agreed to settle litigation with the Vereniging van Effectenbezitters (VEB) (Dutch Shareholders' Association).
Under the terms of the agreement in the securities class action, the lead plaintiffs agree to settle all claims against Ahold for the sum of US $1.1 billion. The settlement covers Ahold, its subsidiaries and affiliates, the individual defendants, and the underwriters.
The worldwide settlement applies to all qualifying common shares of Ahold. The term "qualifying shares" means all those common shares bought between July 30, 1999 and Feb. 23, 2003, the day before the profit overstatement scandal at Ahold-owned, Columbia, Md.-based U.S. Foodservice broke. According to preliminary calculations made by Ahold, the settlement amount, minus plaintiffs' attorneys' fees, compensation in the amount of $9 million to an entity designated by the VEB for facilitating the global settlement and administrative expenses, would yield a pretax amount of about $1 to $1.30 per qualifying share. U.S. and non-U.S. holders of qualifying shares are to be treated equally under the agreement.
Ahold will contribute to the settlement fund, from which the qualifying shares will be paid, in two installments: two-thirds of the settlement amount will be funded into escrow within three business days after 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 after final court approval of the settlement.
If holders of more than 180 million shares opt out of the settlement, then Ahold will have the right to terminate the agreement and recover the funds paid, other than those amounts spent to notify shareholders 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 regarding the yearly financial statements of the company for the years 1998 through 2002. In consideration of the withdrawal of such proceedings and as compensation of costs incurred, Ahold will pay the VEB 2.5 million euros (US $2.9 million).
Additionally, as part of its commitment to contribute to and facilitate the international settlement, the VEB has agreed that after 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 begin or support a proceeding for damages in any court.
Peter Wakkie, a member of the Ahold Executive Board and chief corporate governance counsel, said in a statement: "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. These are the last material civil litigations with significant financial exposure arising out of the facts disclosed in our press release of Feb. 24, 2003. The company can now move forward and focus entirely on its business."
According to Reuters, Andrew Entwistle, a plaintiffs' lawyer in the U.S. class action, said today that he intended to sue for $2 billion to $3 billion from accounting firm Deloitte in connection with Ahold's profit overstatement. Entwistle represents the Public Employees' Retirement Association (Colorado Pera), PERA, and Generic Trading of Philadelphia.