Delhaize Group officials on Thursday said a need to generate greater scale to provide fuel for investment is sparking industry consolidation in the U.S. — and by extension, its own talks of a merger with rival Ahold.
“Food retail has been and will continue to be a highly competitive industry. Given evolving customer needs and demands, traditional grocers, like ourselves, will have to continue investing in order to remain customer-centric organizations and to remain relevant in their respective communities,” Mats Jansson, chairman of Delhaize Group, said in an address at the company’s annual meeting in Belgium. “To deal with these challenges, the food retail market, particularly in the United States, is experiencing an acceleration in consolidation as companies look to realize scale benefits in order to continue funding these investments.”
Niether Jansson nor Delhaize CEO Frans Muller spoke in any detail of the talks with Ahold, which both companies confirmed were ongoing May 12. Ahold officials this week also declined to discuss the talks but said they would provide material updates as required by securities regulators.
Jansson however did say he was suspending his advisory role to J.P. Morgan so as to avoid the appearance of a conflict of interest between Delhaize and Ahold.
“While I cannot confirm that JP Morgan is advisor to Ahold, I can confirm that my advisory role to JP Morgan does not create any conflict of interest given the scope of my consulting mission. Nevertheless, in light of Delhaize Group’s discussions with Ahold and in order to avoid any future possibility of the appearance of any potential conflict-of-interest, I have decided to temporarily suspend my consultancy role at J.P. Morgan. I believe this is the highest integrity decision I can take with respect to this matter.”
Shareholders at the meeting approved the appointment of Dominique Leroy and Patrick De Maeseneire as independent directors, and approved the company’s dividend, but voted to reject a remuneration report by a vote of 54.1% to 45.9%.
In rejecting the report, shareholders took the advice of proxy advisory firm ISS which objected to a retention plan enacted by Delhaize as it transitioned to a new CEO in 2013. A total of $2 million (U.S.) was paid to participants in the plan who remained with the company through July 31 last year.
“We are disappointed by this vote, but we will take the result into consideration and consult with our shareholders,” Jansson said.
Muller confirmed plans for approximately $765 million (U.S.) in capital expenditures this year.
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