Blog: Katy AskewAhold, Delhaize tie-up creates competitive US giant

Katy Askew | 24 June 2015

Dutch supermarket operator Ahold and Belgium-based retailer Delhaize Group announced today (24 June) that a long-awaited merger deal been finalised in a move these two European retail giants hope will improve their competitiveness across the pond.

The combination will create the fifth-largest retailer in the US – a market where Ahold operates under the Stop & Shop and Giant banners and Delhaize runs the Food Lion supermarket chain. Both companies have operations on the east coast and their store portfolio is certainly highly complementary.

Management are likely banking on the likelihood that the merger will enable the combined company – Ahold Delhaize - to operate more effectively in the highly competitive US market, where Ahold Delhaize generates more than 50% of revenue. The companies have been squeezed by growing competition from the likes of Wal-Mart, club stores such as Costco, and the encroachment of the German discounters Aldi and Lidl.

The combined company will generate global sales of EUR54.2bn, with more than 6,500 stores in the US and Europe. Integrating their operations will generate annual cost savings to EUR500m by the third year after the transaction. With the majority of overlap in the US, it seems likely that the lion's share of savings will be generated here. And a more efficient operation should indeed help Ahold Delhaize improve its performance in this highly competitive market.

Under the terms of the transaction, Delhaize shareholders would receive 4.75 shares of Ahold for each share of Delhaize they own. Ahold shareholders would own 61% of the combined company, while Delhaize shareholders would own the remaining 39%. The deal is pending approvals and requires shareholder backing.

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