Ahold's New CEO Faces Investor Pressure to Drop Takeover Defense

(Bloomberg) -- Royal Ahold Delhaize NV’s incoming chief executive officer, Frans Muller, faces rising pressure to end a takeover defense and become more active in U.S. consolidation.

One of the first tasks awaiting the new chief will be deciding whether the Dutch-Belgian company should keep its “stichting” legal structure that can block takeover bids without giving shareholders a chance to vote. Dutch shareholder group VEB and activist investor CIAM have demanded a say in whether the grocer should keep the defense.

“Poison pills are bad corporate governance,” wrote Bruno Monteyne, an analyst at Sanford C. Bernstein. Ahold needs to gain scale in the U.S. and a good way would be merging its business there with rival Kroger Co., the analyst also said Thursday after Ahold announced that Muller will replace retiring CEO Dick Boer, 60, in July.

Amazon.com Inc.’s acquisition of Whole Foods Market Inc. last year has forced retailers worldwide to rethink how best to distribute groceries to customers. Muller, 57, was deputy CEO and chief integration officer after the merger that formed the company in 2016. Before that, Muller led Belgium’s Delhaize and helped reach the $10.4 billion deal to combine with its Dutch rival.

Shares of Ahold Delhaize have dropped 12 percent since the merger as Amazon encroaches into the grocery industry. The Dutch-Belgian company could play a role in U.S. consolidation as it gets about two-thirds of its revenue from that market at chains including Food Lion and Hannaford. Barclays values the company’s U.S. assets at 14.4 billion euros ($17.7 billion) and the European assets at 12.7 billion euros.

One option would be splitting the company up, according to CIAM, a firm that said it owns “several tens of millions” of euros’ worth of Ahold Delhaize stock.

“There is no synergy between both sides,” Chief Investment Officer Catherine Berjal said in an interview in London last month. “They need to think about the future. The sector is really in bad shape, it needs to consolidate and we want the company to find good ideas and not to hide behind this stichting.”

Ahold Delhaize has said its management and supervisory boards have the right to extend the structure without shareholder approval. It is set to expire at the end of this year. The grocer has agreed to discuss the matter at its annual meeting scheduled for next Wednesday, though it won’t go to a vote.

“Valuing a transparent approach to our shareholders, we have put the item on the agenda for discussion,” the company said in an emailed response to Bloomberg News.

‘Ideal’ Timing

Jefferies analyst James Grzinic last month reiterated his view that Ahold Delhaize should engage into further U.S. consolidation, following speculation of talks between Kroger and Target Corp. The timing is ideal because Ahold Delhaize will get a further 18 months of synergies from the merger, helping it to outperform U.S. peers, the analyst wrote in a March 26 note.

Ahold’s U.S. strategy has been a focus for investors in the past. The company sold its U.S. Foodservice business as well as its Tops chain in 2007, following demands by hedge funds Centaurus Capital Ltd. and Paulson & Co. that Ahold divest all its U.S. stores. It merged with Belgium’s Delhaize Group in 2016.

--With assistance from Joost Akkermans

To contact the reporters on this story: Wout Vergauwen in Amsterdam at wvergauwen@bloomberg.net, Lisa Pham in London at lpham14@bloomberg.net.

To contact the editors responsible for this story: Lukas Strobl at lstrobl@bloomberg.net, Thomas Mulier, John J. Edwards III

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