Dive Brief:

• An activist investor is pressuring Ahold Delhaize to not renew a governance structure that it said acts as a “poison pill” to potential acquirers and has kept its stock share price depressed, according to Reuters.
• CIAM, a French hedge fund is criticizing a legal structure Ahold Delhaize has in place called a “stichting,” or foundation that creates a separate holding entity with the voting power to defend against unwanted acquirers.The practice is common for many Dutch companies, but unfair to investors, CIAM claims. 
• Ahold Delhaize introduced stichting into its corporate structure in 2003, and the provision will expire in December of this year. CIAM is pushing for a vote on the measure, but the grocer says that, while it will discuss the matter, it will not bring a vote. 

Dive Insight:

Stichting is a uniquely Dutch construction and has been used effectively before to thwart takeover attempts. For example, in 2015 pharmaceutical company Mylan used a stichting to block a takeover by Teva Pharmaceutical Industries. KPN, a Dutch telecom company, blocked a takeover bid in 2013 by Mexican billionaire Carlos Slim by using a similar structure. 

By challenging the legal structure in place at Ahold Delhaize, hedge fund CIAM hopes to maximize investor equity, while Ahold seeks to maintain control over its own destiny. CIAM, which owns less than 1% of Ahold, said it would be “unlawful” to not put the stichting to a vote at the company’s annual meeting this month, according to Reuters.

But bringing the practice to a vote, much less overturning it, will be incredibly difficult. Dutch newspaper The Telegraaf notes that stichting can be extended indefinitely with only the signatures of the company’s top executives.

The practice doesn't have an immediate impact on the company, and Ahold Delhaize is right now primarily concerned with completing the integration between its namesake entities. But M&A activity in the U.S. grocery space, which has been increasing in recent years, stands to accelerate further as companies jockey to compete with Amazon and Walmart. Ahold Delhaize has an attractive foothold on the East Coast, and could see acquisition interest from another retailer.

Last year, a report surfaced that Kroger and Ahold Delhaize were in talks regarding a possible merger, but the news quickly cooled. In an interview with Food Dive, Ahold Delhaize CEO Dick Boer reiterated that the company is focused on completing the merger announced in 2016.

Activist investors have become increasingly vocal in the food and beverage space. Supervalu is currently facing a proxy fight from Blackwells Capital, which is pressuring the company to jettison its underperforming retail division. Meanwhile, Gamco Asset Management has pushed Ingles Markets to revise its stock and voting structure. On the manufacturing side, CPG companies like Nestle and Unilever have faced mounting pressure to improve their sales and revise their corporate structures.