Corporate Governance at Ahold
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Case Details:
Case Code : CGOV005
Case Length : 14 Pages
Period : 2000 - 2005
Pub Date : 2006
Teaching Note :Not Available
Organization : Ahold NV
Industry : Retail
Countries : Holland, USA
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Excerpts
Ahold's Acquisitions
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Albert Heijn made its first acquisition in 1951 when it acquired the
Netherlands-based Van Amerongen store chain. In 1977, Ahold entered the US
market by acquiring the BI-LO supermarket chain (which had stores in Georgia,
North & South Carolina). This was followed by the acquisition of Giant food
stores (based in Carlisle, Pennsylvania) in 1981 and Finast (based in Ohio) in
1988. With these acquisitions, Ahold strengthened its position in the US. The
1990s was a period of rapid expansion. In 1991, Ahold opened a wholly-owned
supermarket chain called Mana in the Czech Republic (later renamed Albert). In
1992, Ahold entered into a joint venture with the Portuguese chain Jerónimo
Martins to form Jerónimo Martins Retail (JMR)...
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The Scandals
On February 24, 2003, Ahold announced that its earnings for 2002 financial
year would not be as high as previously estimated. It also declared that its
2000 and 2001 financial statements did not reflect its true financial status
and would have to be restated...
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US Foodservice
US Foodservice was a service company which distributed food. Its clientele
included hotels, restaurants, cafeterias, health care facilities, schools,
etc. The company was headquartered in Columbia, Maryland, and had more than
100 distribution centers spread across the US. The Ahold group acquired US
Foodservice in 2000. US Foodservice came to become the epicenter of the
scandal that shook Ahold. The scandal involved US Foodservice executives
colluding with employees at Sara Lee Corporation (Sara Lee), ConAgra and
some other companies to mislead auditors... |
Other Operating Companies
In February 2003, almost simultaneously with the US Foodservice scandal, Ahold
announced that four joint ventures namely - ICA, Jeronimo Martins Retail,
Bompreco (sold in March 2004), Disco (sold in March 2004) and Paiz Ahold (sold
earlier) should not have been fully consolidated in its accounts.
The Ahold
group did not hold a 100% stake in the joint ventures and its consolidation of
100% of the joint ventures' profits in its accounts was tantamount to fraud.
Investor associations felt that Ahold and its auditors D&T were aware or
irresponsibly ignored the fact that Ahold never had a basis for consolidating
the financial results of the joint ventures...
Excerpts
Contd...>>
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