AMSTERDAM Aug 2 Dutch shareholders will seek
compensation from the owner of coffee brand Douwe Egberts after
it issued a profit warning citing fraud and tax problems in
Brazil, just three weeks after listing on the Amsterdam stock
The Dutch Association of Shareholders (VEB), which mainly
represents individual investors, on Thursday said it will demand
redress from coffee company D.E Master Blenders 1753,
its former parent Hillshire Brands, and two advisors.
D.E Master Blenders - whose brands include Senseo coffee
pods and machines and Pickwick tea as well as Douwe Egberts - is
the third-largest player in the global coffee market after
U.S.-based Kraft Foods Inc and Swiss market leader
It was spun off by U.S. group Sara Lee, now known as
Hillshire Brands, in a highly publicised listing on July 9.
But on Wednesday evening, D.E Master Blenders said it had
discovered accounting irregularities when it closed its books
for the financial year ended June 30, and warned that results
would be hit by fraud, tax and inventory problems at its
Past financial statements, from 2009 onwards, will have to
be restated, it added.
Shares in D.E Master Blenders fell more than 7 percent to
hit an intraday low of 8.725 euros on Thursday - below the
opening price of 9.79 euros on the first day off official trade
on July 9.
"It shows how much investors are concerned," said ING
analyst Marco Gulpers.
In the spin-off, Sara Lee shareholders received one share in
D.E Master Blenders for every Sara Lee share they already held.
But D.E Master Blenders expected many U.S. investors who
didn't want exposure to the European coffee company to sell
their shares, and published a 236-page prospectus, dated June 1,
giving information to potential buyers.
Chief financial officer Michel Cup said at the time of the
listing that he expected the stock to attract a good mix of
European investors, particularly British and Dutch individuals,
given their familiarity with the Douwe Egberts brand.
Jan Maarten Slagter, a director of VEB, said on Thursday the
association would demand compensation for investors from
listing bank ABN AMRO and auditors
PricewaterhouseCoopers as well as Hillshire and D.E
"The listing prospectus was based on inaccurate information.
So shareholders who bought shares did so based on inaccurate
information," Slagter told Reuters.
"We are sending letters to the four parties, holding them
liable and inviting them to a meeting to discuss compensation
ABN AMRO declined to comment. PricewaterhouseCoopers was not
immediately available to comment.
Affiliates of investor group JAB - majority owner of U.S.
cosmetics group Coty Inc, which sells perfumes under the Calvin
Klein, Davidoff and Chloe brands - has a 12.19 percent stake in
the Dutch coffee company.
JAB spokeswoman Elke Neujahr said the shares were bought at
the end of June and early July when there was an unofficial, or
"At the moment we want to stay a minor shareholder. We have
no plans to sell shares," she told Reuters on Thursday.
The disclosures are very embarrassing for the Dutch company
which listed in Amsterdam with considerable fanfare.
Prime Minister Mark Rutte attended the listing ceremony at
the stock exchange while full-page advertisements in the local
press heralded the return "home" of a cherished Dutch brand
which, like many other Dutch names, had been bought up by
D.E Master Blenders said on Wednesday it had identified
adjustments in its accounts for fiscal years 2009-2012 and that
these would reduce its net result for the fiscal year ended on
June 30, 2012 by about 45 million to 55 million euros.
Roughly half of that is expected to be accounted for within
operating profit, it said.
"These adjustments, which all involve the company's
Brazilian operations, are partly caused by accounting
irregularities involving uncollectible accounts receivable and
incorrect sales recognition," it said.
"In addition, the company has taken provisions on inventory
levels and made other corrections, including additional tax
The Dutch firm said it was investigating the accounting
irregularities and would take steps to improve internal controls
over financial reporting and governance procedures at its