Grocers Ahold NV and Delhaize Group agree to a $29 billion merger

June 24, 2015 02:09 PM

In a combination that has been anticipated since at least early May, Netherlands-based grocery chain Ahold NV and Belgium-based food retailer Delhaize Group today announced their intention to merge. The combined company, called Ahold Delhaize, will have more than 6,500 stores and 370,000 workers in the U.S. and Europe and will be able to serve more than 50 million customers per week. Ahold Delhaize would be valued at over $29 billion based on Tuesday’s share prices, and the merger is expected to generate annual savings of 500 million euros ($559.4 million).

Ahold NV, No. 15 in the Internet Retailer 2015 Europe 500 Guide, operates mass merchant and grew its European e-commerce sales 16.7% to $1.4 billion euros ($1.57 billion) in 2014. Ahold also operates European grocery store chain Albert Heijn and U.S. online grocery delivery service Peapod LLC, No. 69 in the Internet Retailer 2015 Top 500 Guideas well as Giant and Stop & Shop chains in the U.S.

Belgian food retailer Delhaize Group controls U.S. grocers Food Lion and Hannaford and operates such e-commerce sites as French mass merchant Cora, No. 141 in the Europe 500 Guide.

“This is a true merger of equals, combining two highly complementary businesses to create a world-leading food retailer,” said Mats Jansson, chairman of Delhaize Group. Jansson will serve as chairman of Ahold Delhaize.

Ahold CEO Dick Boer will serve as CEO of Ahold Delhaize after the merger.

Neil Saunders, CEO of retail research and consulting firm Conlumino, thinks that the Ahold Delhaize merger will have a major impact on the U.S. grocery landscape, mainly due to the annual savings it will create.

“In terms of U.S. operations, a bigger company is a defensive necessity in a grocery environment that has become more price-focused and in which deep discounters, like Aldi and now Lidl, are set to grow,” Saunders says. "Although both Delhaize and Ahold have had some success in growing their sales lines in the U.S., their bottom lines have been affected by discounting and price cuts; something that this merger will help to mitigate, although not completely remedy."

The merger will create one of the largest food retailers in the U.S. and Europe and should help boost Ahold's strong online grocery business, says Keith Anderson, vice president of strategy & insights for e-commerce intelligence agency Profitero. "Ahold is stronger in online grocery than Delhaize; they operate Peapod, the longest continuously operating online grocer in the US and, a leading online retailer in the Netherlands. The combined entity could leverage some of Ahold's expertise and capability to accelerate growth in the increasingly critical online grocery channel."

The companies say the transaction will likely be completed in mid-2016.




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