WBVN's was doomed to fail as soon as they committed to an aggressive national roll out. PPOD wins (sort of) by playing the tortoise to WBVN's hare.
suntimes.com
Peapod wins battle, but loses online
war
July 17, 2001
BY SANDRA GUY BUSINESS REPORTER
Chicago's last online grocer couldn't survive as a publicly traded company, even
after besting its online competitors, and will be taken over by the brick-and-mortar
grocer that rescued it in April 2000.
Skokie-based Peapod, which plans to keep its headquarters here, is being bought
outright by its majority owner, grocer Royal Ahold NV of Zandaam, Netherlands.
Ahold, which owns 58 percent of Peapod, will pay $35 million in cash to acquire
the remainder of the online grocer's stock. The offer of $2.15 a share, or 72
percent more than Friday's closing price, is below the $3.75 a share paid when
Ahold bought an initial stake last year, said Ahold spokesman Jan Hol.
Peapod shares jumped 86 cents on Monday to close at $2.11. The stock traded
as low as 69 cents in January.
The partnership appears to be one of the few successful business models for online
grocers because so much capital and infrastructure are required to be successful,
said David Kathman, stock analyst for Morningstar Inc., a Chicago investment
research firm.
Peapod will become a wholly owned subsidiary of Ahold after the takeover is
completed in the third quarter, which ends Sept. 30. Peapod also will be de-listed
from Nasdaq at that time.
Ironically, Peapod's board of directors accepted Ahold's takeover after a special
committee determined that it was the only way to raise the money required to keep
Peapod listed on the Nasdaq exchange.
A company must have more than $4 million in net tangible assets on its balance
sheet to remain on the Nasdaq. Peapod's assets would have fallen below $4 million
in the third quarter that started July 1, said Peapod President and CEO Marc van
Gelder.
No other financing was available because venture capital has dried up for dot-com
companies and Ahold already held 58 percent of Peapod's common stock, van
Gelder said.
Initially, Ahold offered $1.50 a share. Negotiations went up to $2.15. William Blair
& Co. assisted in the transaction.
Royal Ahold's purchase of the remaining 42 percent of Peapod strengthens the link
between online sales and the Dutch company's supermarket chains in the United
States.
The takeover follows last week's Chapter 11 bankruptcy filing by rival Webvan
Group Inc., which lost more than $800 million trying to sell groceries over the
Internet. Peapod's sales have soared 50 percent in the Chicago area since
Webvan's demise, said van Gelder, who declined to give figures.
Homeruns.com, which competed with Peapod in Boston and in Washington, D.C.,
also ceased operations late last week, leaving Peapod the only online grocer
standing in the five markets it serves.
''Peapod is now profitable in its home market of Chicago,'' Hol said. ''The whole
concern is expected to have a profit in 2003.''
Ahold initially bought a 51 percent stake in Peapod, and later increased it by 7
percent. In February, Ahold increased an existing loan to Peapod from $20 million
to $50 million.
After Ahold stepped in last year, Peapod closed operations in San Francisco to
focus on the East Coast, where Ahold is the market leader with its Stop & Shop,
Giant and other chains.
Ahold's purchase of Peapod will be ''almost neutral'' on Ahold's 2001 earnings per
share, the company said.
In Amsterdam, Ahold shares fell 49 cents, or 1.4 percent, to close at 35.6 euros. |
