IRIS, the think tank of investment bank Rabobank, has made shares in Dutch retailer Ahold its top pick for 2008 – and says the company is now ready to merge with Belgian counterpart Delhaize.
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In its preview for 2008, IRIS said Ahold had virtually completed its transformation into a solid-margin supermarket retailer of considerable scale and was therefore ready for a merger with Delhaize. The two companies were reportedly engaged in informal takeover talks last autumn.
“A merger with Delhaize would bring with it excellent synergy advantages,” IRIS said. “With the transformation into a focused retailer with a healthy bottom line, it is time for a strategy reorientation.”
IRIS said it believes investors are also now looking towards a merger between the two retailers, and expects this will become an increasing matter of speculation during 2008.
While the synergies derived from the overlap in distribution, the increased purchasing power and the combination of the best practices of both companies, make a compelling case for merger, IRIS said Ahold shares remains a “strong proposition” as a buy even without a merger.
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By GlobalDataIRIS has a price target of EUR13 (US$19.2) for Ahold shares which are currently trading at around EUR9.58.
