Ahold to settle shareholder suit for $1.1b

AMSTERDAM -- Royal Ahold NV, which owns the Stop & Shop and Giant supermarket chains along with other retail operations worldwide, said yesterday it has agreed to pay $1.1 billion to settle a class-action lawsuit brought by US shareholders after its 2003 accounting scandal.

Peter Paul de Vries of the Dutch Shareholders' Association, which helped broker the deal, said the proposed settlement ''was not of such a size that it will hurt Ahold" but it would help the company ''leave a black chapter behind it."

Ahold lawyer Peter Wakkie said it was a coincidence that the amount of the settlement paralleled that of the scandal, in which Ahold overstated earnings by more than 1 billion euros in 1999-2002, mostly by inflating sales at its U.S. Foodservice subsidiary.

Ahold's former top management resigned in February 2003 after the company made the fraud known, and its shares lost two-thirds of their value overnight. The company eventually restated earnings for 2002 to a loss of $5.01 billion. It avoided bankruptcy by selling assets and by an emergency credit line from its banks.

The agreement requires approval from a court in the Baltimore district, where the case was filed, and from holders of at least 180 million shares out of around 800 million shares that qualify.

Ahold said an estimate of the compensation would be up to $1 to $1.30 per share. Lawyer Andrew Entwistle, whose firm is leading the class-action suit, said payouts would depend on the size of the loss each shareholder suffered.

Ahold shares rose 0.8 percent to $7.10 a share in Amsterdam trading. Its US shares rose 9 cents to $7.11 on the New York Stock Exchange.

Wakkie said the settlement struck a balance between the chance of winning in court versus the consequences if it lost. It was also made with an eye on recent hefty settlements in the Enron Corp. and WorldCom cases.

''The stakes were too high to just gamble," he said.

Since 2003, Ahold has gradually regained firm financial footing, and posted net profit of $162 million in the second quarter on sales of $13 billion.

The company said it will take a charge of $687 million related to the settlements when it reports third-quarter results today.

The US Securities and Exchange Commission has settled civil fraud charges against Ahold and top executives without fining them. In ongoing criminal cases, U.S. Foodservice's former chief financial officer, Michael Resnick, and former chief marketing officer, Mark Kaiser, are awaiting trial. They have said they are not guilty of wrongdoing.

Two other former vice presidents of the of the Columbia, Md.-based subsidiary, Timothy Lee and William Carter, pleaded guilty.