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U.S. turnaround key to Delhaize pursuit of Ahold deal

U.S. turnaround key to Delhaize pursuit of Ahold deal

Delhaize Group declined to engage in merger discussions with its international rival Ahold in 2013, but reignited talks last spring following the turnaround of its U.S. business.

Talks leading to an agreement on the proposed merger began last March 8, when Delhaize CEO Frans Muller phoned his counterpart at Ahold, Dick Boer, and told him the Delhaize board would support the possibility of a potential business combination. The Delhaize board at that time was considering several strategic alternatives including the acquisition of one or more existing companies, according to a Form F-4 filing providing background of the deal with the Securities and Exchange Commission Monday by Ahold.

Ahold and Delhaize agreed to what the companies called a “merger of equals” last June, and expect to close the deal in the first half of this year.

According to the filing, Ahold first approached Delhaize about a potential business combination in June  2013, but was informed in a meeting that August that it was not the right time for Delhaize.

Delhaize at that time was in search of a new CEO, as Pierre-Oliver Beckers had announced plans to retire but a successor for Muller had not yet been named. The company then was only beginning to address slowed sales momentum at its Food Lion chain and undertaking a radical restructuring of its operations in its Belgium home market.

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Under Muller, who took over later that year, investments at Food Lion continued, and its “Easy Fresh & Affordable” brand repositioning regained sales momentum for the chain.

“The Delhaize board determined to continue exploring a potential transaction with Ahold because it believed that, following the turnaround of Delhaize’s U.S. business and the restructuring of its Belgian business since 2013, a potential business combination transaction with Ahold was the most attractive strategic alternative if it could be completed on agreeable terms,” the filing said.

The filing also detailed how the companies ironed out differences in valuation, board composition and other issues stemming from each side using “different assumptions and methodologies” to determine them. A final agreement, calling for an exchange of 4.75 Ahold shares for each Delhaize share and a reverse-stock split, was agreed to on June 24.

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