Royal Ahold (NYSE: AHO) said Friday it has settled a lawsuit with shareholders
of Peapod (Nasdaq: PPOD), clearing
the way for a planned buyout of the online grocer.
The settlement, which still must be approved by a judge, makes it possible for
Ahold to move ahead with its planned purchase
of all outstanding Peapod shares.
Ahold's offer of US$2.15 per share, which was announced in late July, is set to
expire early next week.
Shortly after the buyout offer was announced, at least one Peapod shareholder had
sued to halt the deal , claiming the $35 million sale price undervalued the
pioneering Web grocer, which traces its roots back to the late 1980s.
The suit claimed that because Peapod's financial performance had begun to
improve since Ahold paid $73 million for a majority
stake in the online grocer in April of 2000 and because of the recent closing of
competitors Webvan and HomeRuns, Peapod was undervalued in the deal.
The class-action suit, which potentially represented all 16 million U.S. Peapod
shareholders, sought to stop the merger from moving forward and to award
shareholders financial damages and attorneys' fees.
Better Days
In fact, Chicago, Illinois-based Peapod has already started to benefit as its
field of competitors thins. A Peapod spokesperson said recently that during the
past month, orders and new customers have nearly doubled in Chicago, where Peapod
competed with the now-bankrupt Webvan, and are also up in Boston, where it went
head-to-head with HomeRuns.
Peapod has also begun to expand its Washington,
D.C. service area to move into urban and suburban areas previously served by HomeRuns.
The bigger picture may be a bit less rosy, however. Jupiter Media Metrix recently
slashed its forecast for online grocery sales
in half for 2001, from $2 billion to $1 billion, and pulled back on earlier
projections for long-range industry growth.
'Without Merit'
Ahold, which did $24 billion in sales last year, said despite agreeing to a
settlement, it maintains that the suit was "without merit" and said it had
intended to vigorously defend against it.
Financial terms of the settlement were not disclosed. Ahold, which is based in
the Netherlands and operates 8,500 brick-and-mortar stores worldwide, including
U.S. grocery chains Stop & Shop and Giant Foods, said its offer to buy Peapod
remains on the table.
If the deal goes through, Peapod will be absorbed into an Ahold subsidiary and
Peapod shares will be delisted from the Nasdaq.
Royal Ahold Wants 100 Percent of Peapod July 16, 2001
After the deal is completed, Internet grocer
Peapod will merge with a Royal Ahold subsidiary and
be delisted from the Nasdaq exchange.
Internet Grocer HomeRuns.com Shuts Down July 13, 2001
Some analysts say that alliances with traditional
grocers are the only way online grocery businesses will survive.
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, claiming the $35 million sale price undervalued the
pioneering Web grocer, which traces its roots back to the late 1980s.
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