NEW YORK (CNNfn) - Shareholders of troubled Internet grocer Peapod Inc. on Friday approved a proposed $73 million investment in the company by Royal Ahold, the Dutch parent of Stop & Shop, Tops Market and other supermarkets.|
Shareholders voted to approve Ahold's investment in the Chicago-based company at its annual meeting there Friday.
Under the agreement, Netherlands-based Ahold is investing $72.6 million in a newly issued series of convertible preferred Peapod stock with a conversion price of $3.75 a share, representing 51 percent of Peapod's outstanding common stock on a converted basis.
In addition, four Peapod directors resigned and were replaced, leaving Peapod's board at 11 members.
"We are very pleased to have consummated this strategic partnership with Royal Ahold," Marc van Gelder, Peapod's president and chief executive officer said.
The agreement, which was first announced in April, came just as Peapod was nearing a dot.com death. Continued operating losses have drained the company of cash and its former CEO Bill Molloy had suddenly resigned, prompting investors to pull $120 million out of the company.
Ahold, based in Zandaam, The Netherlands, posted $20 million in 1999 and is also the parent company of Giant-Landover, Giant-Carlisle and Bi-Lo supermarkets.
"These five companies offer a tremendous opportunity for Peapod and Ahold to leverage their combined expertise in e-commerce and food retailing," van Gelder said.
Peapod serves eight metropolitan markets in the United States, including Boston, Dallas, Chicago and San Francisco.
Peapod's shareholders approved the deal the same week that rival WebVan Group (WBVN: Research, Estimates) based in Foster City, Calif. acquired HomeGrocer.com (HOMG: Research, Estimates), based in Kirkland, Wash., in a $1.2 billion stock swap.
Both deals reflect the troubled online grocer sector in which virtually all the competitors have yet to turn a profit and have seen their shares plummet in the last year.
Peapod (PPOD: Research, Estimates) shares closed up 3/32 at 3-1/32 ahead of the announcement Friday.