Ketner says the merger will be a disaster for Food Lion because the company will be paying $1 billion too much for Hannaford and will carry $3 billion in debt at a rate of 7.8 percent, or $234 milliion per year in interest. He points to the lower stock prices for Delhaize America as proof of a bad deal. Delhaize America is the holding company under which Kash n’ Karry and Food Lion are separate subsidiaries. If the merger goes through, Hannaford will also become a subsidiary.

Responding to Ketner’s charges, Tawn Earnest, corporate communications manager of Food Lion, said in larger mergers and acqusitions, the stock of the acquiring company always goes down at first, while the stock of the company being acquired goes up. But the stock of the acquiring company — in this case, Food Lion — goes back up later.

Acquiring Hannaford will create the nation’s sixth-largest supermarket operator, Earnest said. This will allow the company to continue competitively in the “consolidating U.S. supermarket industry.”

Ken Gassman, an analyst with the regional brokerage firm Davenport and Co., which has been following Food Lion for nearly 18 years, said in a telephone interview mergers have become necessary in the grocery business. “In a rapidly consolidating industry, you either are a consolidator, which is Food Lion (Delhaize)strategy, or you will be gobbled up.”

David Orgel, senior editor of the trade publication Supermarket News, agreed. “The supermarket world is changing rapidly. The industry is rapidly consolidating, and the supermarket companies are trying to ally themselves with other companies through mergers for increased buying power and increased efficiencies,” he said in a telephone interview.

He said the trend was spawned by Wal-Mart, whose super centers were a wake-up call to the supermarket industries. “The industry is developing a number of giant operators because there is a feeling that larger is better for survival.”

Orgel said that some small grocery stores survived by moving into highly specialized niche markets and that those at mid-level would fail or be taken over if they didn’t move to expand.

“You are going to have large players and niche players. The smaller ones serve particular needs of customers. Companies in the middle are right now the focus of the acqusitioin act,”he said. “Many of the larger deals have already been done.”

Earnest described the Food Lion merger as a positive expansion. “By combining with Hannaford, Delhaize America moves from being a regional retailer in the Southeast to a multi-regional retailer with stores from Maine to Florida.”

She said stock prices don’t indicate where a chain stands in the grocery business right now because this has not been a good year for any grocery stock. Orgel agreed.

Big stock profits have been in high tech stocks. Although the Standard and Poor’s 500 is up 21 percent for the 12-month period to April 5 and the Dow Jones Industrial Average is up 20.2 percent, grocery stocks are down. Safeway is down 24.1 percent in the same period, Kroger is down 66.5 percent and Delhaize America falls in the middle, down 44.7 percent.

Ketner is protesting several issues besides stock prices and the merger, especially the fact that the company has rejected a request for a cumulative voting arrangement that would allow him, or another representative, a position on the board of directors. Ketner says 47 percent of stockholders, holding more than 36 million shares, have no representation on the board.

Earnest responded that in 1990, when cumulative voting came up while Ketner was still on the board, he was one of those who voted against it. She said cumulative voting is typically used in smaller, family-owned companies and no major publicly held corporation in America has cumulative voting.

Ketner also claims the company has given CEO Bill McCanless an unwarranted stock option for 267,000 shares.

Earnest responded Food Lion compensates its executives fairly by using independent consultants from Towers Perrin to benchmark executive pay and making sure shareholders’ interests are represented on the company’s executive compensation committee. She said only non-management board members serve on the executive compensation committee. Two of the members of the three-man committee are from Delhaize Le Lion, the largest single owner of Food Lion stock. “Like other shareholders,”Earnest said, “Delhaize receives only dividends.”

The stock award is an incentive that McCanless cannot receive until April, 2002 at the earliest, and then only if the value of the stock rises to $60 and stays there for 45 days or more. “If the company’s stock drops, Bill’s stock award also loses value,” Earnest said.

Ketner has claimed the Delhaize America shareholder’s meeting is scheduled to be held in Tampa-St. Petersburg, Fla., on May 4 because it is 500 miles away from North Carolina, so local stockholders won’t introduce unfriendly questions about what’s going on with the company.

“Delhaize America is a new company,”Earnest said. “There has been no annual meeting of Delhaize America shareholders before this year, so there is no traditional meeting place yet established.”She said the Tampa location reinforces Delhaize America’s growing multi-banner, multi-regional strength.”Kash n’ Karry is a Tampa based company.