Zaandam, the Netherlands – Ahold announced today that it has signed a term sheet agreeing in principle to settle a class action pending in the United States District Court for the District of Connecticut in respect of pricing practices of Ahold's former subsidiary U.S. Foodservice in the period 1998-2005.
Under the term sheet that was signed today, Ahold has agreed to make a payment of $297 million into a settlement fund in return for a release from all claims from all participating class members in relation to these pricing practices.
Ahold indemnified U.S. Foodservice against damages arising out of this class action, referred to in Ahold's annual reports as the "Waterbury litigation", as part of the terms of Ahold's sale of U.S. Foodservice in July 2007 to a consortium of Clayton, Dubilier & Rice and Kohlberg, Kravis Roberts & Co for a purchase price of $7.1 billion.
The class comprises any person in the United States who purchased products from U.S. Foodservice pursuant to an arrangement that defined a sale price in terms of a cost component plus a mark-up and for which U.S. Foodservice used a so-called “Value Added Service Provider” transaction to calculate the cost component.
The settlement is subject to approval by the United States District Court for the District of Connecticut, which is anticipated to address the issue in late 2014 or early 2015 and is subject to potential reduction and/or termination based on the compensable sales volume attributable to class members that elect to opt out of the settlement (i.e. do not wish to be bound by the settlement). Upon becoming unconditional the settlement will definitively resolve this potential liability for Ahold.
Ahold will record a provision in the amount of €215 million in Q1, 2014. Ahold will be funding its payment to the settlement fund out of its available cash balances and expects this payment to take place in late 2014 or the beginning of 2015.
Commenting on the settlement, Lodewijk Hijmans van den Bergh, member of the Ahold Management Board and Chief Corporate Governance Counsel, said: "We are pleased to have reached this settlement which resolves a legacy litigation since 2006 related to our former subsidiary U.S. Foodservice. The settlement permits us to avoid more lengthy, time-consuming and costly litigation, and to focus our resources and attention to our current business."
This press release includes forward-looking statements, which do not refer to historical facts but refer to expectations based on management's current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those included in such statements. These forward-looking statements include statements as to the court approval of and size, funding and timing of the payment under the settlement. Many of the above risks and uncertainties relate to factors that are beyond Ahold's ability to control or estimate precisely, such as discussed in Ahold's public filings and other disclosures. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. Koninklijke Ahold N.V. does not assume any obligation to update any public information or forward-looking statements in this release to reflect subsequent events or circumstances, except as may be required by law. Outside the Netherlands, Koninklijke Ahold N.V., being its registered name, presents itself under the name of "Royal Ahold" or simply “Ahold".