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Dropped by Ahold: More on Meurs Resignation

Acquisition of U.S. Foodservice may have cost Royal Ahold CFO Michael Meurs his job.
Lisa YoonFebruary 25, 2003

Michael Meurs resigned Monday as CFO of Royal Ahold NV, along with chairman and chief executive Cees van der Hoeven. The two are stepping down because of accounting irregularities that resulted in Ahold’s earnings being inflated by at least $500 million between 2001 and 2002.

Henny de Ruiter, chairman of the supervisory board, is taking over for the two executives in the interim.

According to Dow Jones, De Ruiter said the problems came out as the Zaandam, Netherlands-based retailer was preparing its 2002 results, which have been postponed indefinitely. He declined to get into more specific details, but said the company is investigating the accounting at a number of its units.

Ahold, which owns Stop & Shop and U.S. Giant supermarkets, is looking into the books at several of its units around the world, including the American institutional-catering service U.S. Foodservice. Among the other properties it’s investigating: Scandinavian joint venture ICA Ahold, Portuguese joint venture Jeronimo Martins Retail in Portugal, and Argentine supermarket Disco International Holdings. It’s also examining its stakes in other supermarkets in Brazil and Central America.

Though at the moment there’s no investigation by Dutch authorities into possible wrongdoing, the event is another in a drumbeat of accounting-related departures by once admired executives over the past year.

Like WorldCom and Tyco, Ahold’s problems follow a period when the company was a shareholder darling. The story is familiar: The retailer, started in 1887 as a family business, became a high flyer in the 1990s and early 2000s through a series of acquisitions. More than $19 billion later, it took its place as the world’s largest food distributor and third largest retailer. According to reports from Dow Jones and the New York Times, Ahold picked up several Dutch business awards, including CFO of the year in 2001 for Meurs.

Meurs, a former banker with ABN Amro, joined Ahold in 1992 and became CFO in 1997. In an April 2001 profile in CFO Magazine, Meurs maintained that Ahold’s acquisitions were backed by a studied, deliberate approach. “We err on the side of caution,” he noted at the time. “We don’t want to buy companies that are for sale. We want to buy what we want to buy.”

At the time, Ahold’s Asian market was the only one losing money. But more recently, the picture began to cloud. Last year, it sent out two profit warnings and took heat for some of its accounting methods, including how it handled revenue from real-estate sales.

The company is also deep in debt after borrowing heavily to finance its acquisitions, a concern that existed even in 2001. In the CFO article, Meurs dismissed such concerns, telling the magazine, “Alan Greenspan has a much bigger effect on our cost of capital than the ratings agencies do.”

Yesterday, Standard & Poor’s cut Ahold’s credit rating to junk status.

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