AMSTERDAM, Netherlands — Royal Ahold NV, which owns the Stop & Shop and Giant supermarket chains in the United States along with other retail operations worldwide, said Monday it has agreed to pay $1.1 billion to settle a class action lawsuit brought by U.S. 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's top 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 4.33 billion euros ($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.
Allocation of the payout will be worked out between the plaintiffs' lawyers and the court.
Ahold said a rough 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 the shareholder suffered.
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.
Ahold said the settlement represented the last "significant" civil cases it faces in the scandal. But Entwistle said he would push ahead with plans to sue Ahold's former accountants Deloitte & Touche for $2 billion to $3 billion for its actions.
"It's our view that they are very much responsible for everything that took place," Entwistle said. "None of this would have happened if they were doing their job properly."
Deloitte has denied wrongdoing in the past, and Ahold's Wakkie supported the firm on Monday.
"We have a different opinion than Andrew (Entwistle)," he said. "We do not believe Deloitte is culpable in the fraud — they were misled as much as anybody else."
Since 2003, Ahold has gradually regained firm financial footing, and posted net profit of 130 million euros ($162 million) in the second quarter on sales of 10.4 billion euros ($13 billion).
Ahold's debt is 6.1 billion euros ($7.6 billion), half what it was at the height of the company's crisis in 2003.
The company said it will take a charge of 585 million euros ($687 million) related to the settlements when it reports third quarter results today on Tuesday.
The U.S. Securities and Exchange Commission has settled civil fraud charges against Ahold and top executives without fining them.