Ahold has signed an agreement to settle a class-action lawsuit pending in the U.S. District Court in Connecticut regarding pricing practices of the company’s former subsidiary, U.S. Foodservice, from 1998-2005. Under the term sheet that was signed this week, 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 the pricing practices.
“We are pleased to have reached this settlement which resolves a legacy litigation since 2006 related to our former subsidiary U.S. Foodservice,” said Lodewijk Hijmans van den Bergh, member of the Ahold management board and chief corporate governance counsel. “The settlement permits us to avoid more lengthy, time-consuming and costly litigation, and to focus our resources and attention to our current business.”
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.
Ahold says the class “comprises any person in the U.S. 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 U.S. 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. Upon becoming unconditional the settlement will definitively resolve this potential liability for Ahold.