AHOLD SHAREHOLDERS DIVIDED ON PURSUING INVESTIGATIONS 2004-03-08 (1)

MARK HAMSTRA

ZAANDAM, Netherlands -- The accounting meltdown that has forced Ahold here to reorganize its operations has left shareholders divided, analysts said.

While institutional investors are primarily concerned with how the company can reorganize successfully, many individual shareholders in the Netherlands are seeking to make sure the executives who led the company into its current situation are punished.

"[The shareholders] are focused on what went wrong and making sure those who were responsible are held accountable," said Patrick Roquas, analyst, Kempen Securities, Amsterdam.

At an extraordinary shareholders' meeting last week in The Hague, Netherlands, Anders Moberg, president and chief executive officer, Ahold, pleaded for shareholders not to press for a further investigation to expose those responsible for the company's $1 billion-plus profit overstatement.

"Our future, the future returns to our shareholders and the value we bring to our customers depends upon our undivided focus on rebuilding the strength of our business," he said. "The commotion will continue as the company awaits the findings of investigations and other proceedings, including those by the [Securities and Exchange Commission,] the U.S. Department of Justice, the Dutch Prosecutor and class-action lawsuits. With regard to this ... it is not in the best interests of the company to start any additional investigation. I want to appeal to you to wait, at least until the current investigations are concluded."

Moberg described Ahold's problems as being the result of "the misguided actions of a handful of individuals" and not "wholesale corruption throughout the company." He said 39 executives and managers had been removed in the wake of the scandal and another 60 had been disciplined to various degrees.

According to reports last week, Ahold will seek repayment of all or part of the 2000 and 2001 bonuses paid to three executives from the company's U.S. Foodservice division. The three executives are James L. Miller, former chief executive officer; Mark P. Kaiser, former chief marketing officer; and Timothy Lee, a purchasing executive.

A spokesman for Ahold could not be reached for comment on the reports. The company previously said its former chief executive officer and chief financial officer, Cees van der Hoeven and Michael Meurs, respectively, had agreed to repay part of their bonuses, and the company said it would seek to reclaim a portion of the bonuses paid to certain board members who served during the past three years.

The Association of Dutch Stockholders, which Kempen said represents a minority of Ahold's shareholders, in January threatened to sue the company to restate its earnings for 2000-2002.

"They're trying to ask for several additional investigations to see what went wrong and who is to blame," he said.

Ahold's stock price has nearly regained the value it lost last year after the company revealed that it had discovered hundreds of millions of dollars in profit overstatements at its U.S. Foodservice division, primarily because of the improper recognition of vendor allowances.

Kempen said the institutional shareholders are concerned about the investigations only to the degree that the associated class-action suits could impact Ahold's future profits. "They are trying to look forward, to see what the company will do to be profitable in the long term," he said.

Ahold said it spent more than 100 million euros ($121 million) on legal and accounting advice fees in 2003. It also spent 115 million euros (about $140 million) on the stock offering it conducted to raise funds to help pay down debt.

Shareholders at the meeting last week approved the company's adoption of a stricter new code of corporate governance. Ahold said it is one of the first Dutch companies to implement the new Tabaksblat code, which gives shareholders more control over executive compensation, as well as some investment and divestment decisions, according to reports. The code was developed last year in the wake of Ahold's financial crisis.

Separately, Ahold said it has reached agreements to sell its holdings in Brazil and Thailand as part of its strategy to shed assets to further reduce debt. It recently unveiled plans to try to sell its Bruno's and Bi-Lo supermarket chains based in Birmingham, Ala., and Mauldin, S.C., respectively, and has shed its convenience-store operations in the U.S. It is also planning to reduce costs by combining its Giant of Carlisle, Pa., operations with those of Tops Friendly Markets, Buffalo, N.Y., and its Giant of Landover, Md., operations with those of Stop & Shop, Quincy, Mass.

The company said it would sell its stake in CRC.Ahold, which operates 47 supermarkets and a convenience-store wholesaling operation in Thailand, to its joint-venture partner for undisclosed terms. The sale would remove Ahold completely from Asia.

Wal-Mart Stores, Bentonville, Ark., agreed last week to buy Ahold's 118-unit Bompreco chain in Brazil for $300 million.