U.S. Food suppliers reportedly probed

Ahold's 3Q disappoints

stock offering planned with a 42% price discount


AMSTERDAM, Netherlands - Royal Ahold NV reported disappointing third-quarter results yesterday, and said that regulators in the United States are investigating some suppliers of its U.S. Foodservice subsidiary in relation to a $1.1 billion accounting scandal this year.

The debt-ridden Dutch food retailer, which announced a $3.55 billion issue of new stock, did not identify the suppliers it said were under investigation.

"Suppliers of U.S. Foodservice are being investigated by the SEC and Department of Justice," Henny de Ruiter, who stepped down yesterday as chairman of Ahold's supervisory board, told shareholders. After an exchange with a board member, he added that not every supplier was under investigation, but "a number" of them were.

Securities and Exchange Commission and Justice Department investigators are reportedly examining how U.S. Foodservice booked $880 million worth of promotional allowances from vendors that were later voided by accountants.

Ahold has acknowledged that a few former managers at Columbia, Md.-based U.S. Foodservice received performance-related bonuses based on the inflated figures. The company told shareholders yesterday that it was committed to recouping that money if at all possible.

Ahold had said earlier that an investigation of the American subsidiary - apart from suppliers - would probably result in charges against some of its former managers. Peter Wakkie, a lawyer named to the Ahold board yesterday, said civil or criminal charges against former U.S. Foodservice managers would "make it easier" to win judgments against them.

Shareholders pressed Ahold's managers to explain how they intend to reduce its 11 billion euros of debt and restore credibility to the company.

Ahold said it would sell, starting today, 621 million shares of new stock at 4.83 euros ($5.70) apiece, a 42 percent discount from the price of outstanding stock. The stock sale would generate about 3 billion euros.

The company, which owns several supermarket chains in the United States, including Giant Food and Stop & Stop, said it was committed as well to divesting itself of 2.5 billion euros in assets by 2005.

Analysts generally welcomed the new stock offering but expressed surprise at the deep discount. The stock offering is to Dutch investors and institutional investors worldwide. Dutch investors, who can buy two new shares for every three they already own, endorsed the offering, but some still expressed reservations.

"Shareholders are footing the bill for what went wrong here," said Peter Paul de Vries, director of the Dutch shareholders association, VEB.

Ahold's accounting scandal also continued to weigh on the company's financial results. Ahold reported a third-quarter loss of 102 million euros ($120 million), in contrast to a net profit of 159 million euros ($187 million) in the period a year earlier. Sales fell 7.1 percent.

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