Notes to the
consolidated
financial statements
continued
34 Commitments and contingencies continued
Overview
Business review
Governance
Financials
Investors
Ahold Delhaize Annual Report 2016
Divestment of remedy stores in Belgium
In March 2016, Ahold Delhaize received approval from the Belgian Competition Authority (BCA) for the merger between Ahold and Delhaize.
The approval is conditional upon the divestment of a limited number of stores in Belgium to address competition concerns raised by BCA.
The divestment process is ongoing. To date, no divestments have been made. Until all requirements imposed by the BCA have been met, Albert
Heijn and Delhaize stores in Belgium will continue to operate separately. See also Note 5to the consolidated financial statements.
Legal proceedings
Ahold Delhaize and certain of its former or current subsidiaries are involved in a number of legal proceedings, which include litigation as a
result of divestments, tax, employment, and other litigation and inquiries. The legal proceedings discussed below, whether pending, threatened
or unasserted, if decided adversely or settled, may result in liability material to Ahold Delhaize’s financial condition, results of operations or
cash flows. Ahold Delhaize may enter into discussions regarding the settlement of these and other proceedings, and may enter into settlement
agreements, if it believes settlement is in the best interest of Ahold Delhaize’s shareholders. In accordance with IAS 37 “Provisions, Contingent
Liabilities, and Contingent Assets,” Ahold Delhaize has recognized provisions with respect to these proceedings, where appropriate, which are
reflected on its balance sheet.
Divestment of remedy stores in the U.S.
In July, 2016, as a condition of receiving regulatory clearance for their merger from the United States Federal Trade Commission (FTC), Ahold and
Delhaize entered into a consent agreement (“Consent Agreement”) with the FTC that required Ahold and Delhaize to divest stores in seven states
in order to prevent the merger from being anti-competitive. In connection with the Consent Agreement, Ahold and Delhaize subsidiaries entered
into agreements with seven buyers to sell a total of 86 stores (81 of these stores are required divestitures under the Consent Agreement), including
73 leased stores and 13 owned stores. As of January 1, 2017, Ahold Delhaize had completed all of the required divestitures, except for the sale of
seven stores in Richmond, Virginia, which are scheduled to be sold to Publix North Carolina LP by July 2017. With respect to the 73 leased stores, the
store sales involve the applicable Ahold Delhaize subsidiary assigning each store lease to the buyer. Pursuant to applicable law, the Ahold Delhaize
subsidiary assigning each of the 73 leases may be contingently liable to the landlord under such lease, in the event of a future default by the tenant
under such lease. Any other Ahold Delhaize subsidiary that previously held the tenant’s interest in such lease may also be liable in such event.
In addition, Ahold Delhaize or Ahold Delhaize subsidiaries also may be contingently liable to landlords under the guarantees of 13 of the 73 leases
in the same event. See also Note 5 to the consolidated financial statements.
Income tax
Because Ahold Delhaize operates in a number of countries, its income is subject to taxation in differing jurisdictions and at differing tax rates.
Significant judgment is required in determining the consolidated income tax position. We seek to organize our affairs in a sustainable manner,
taking into account the applicable regulations of the jurisdictions in which we operate. As a result of Ahold Delhaize’s multi-jurisdictional
operations, it is exposed to a number of different tax risks including, but not limited to, changes in tax laws or interpretations of such tax laws.
The authorities in the jurisdictions where Ahold Delhaize operates may review the Company’s tax returns and may disagree with the positions taken
in those returns. While the ultimate outcome of such reviews is not certain, Ahold Delhaize has considered the merits of its filing positions in its
overall evaluation of potential tax liabilities and believes it has adequate liabilities recorded in its consolidated financial statements for exposures
on these matters. Based on its evaluation of the potential tax liabilities and the merits of Ahold Delhaize’s filing positions, it is unlikely that potential
tax exposures over and above the amounts currently recorded as liabilities in its consolidated financial statements will be material to its financial
condition or future results of operations.
