Blog: Dean BestLots of chatter about grocery M&A on both sides of pond

Dean Best | 5 October 2017

The last 24 hours or so have seen possible M&A deals among some of the biggest names in food retail speculated on both sides of the Atlantic.

First, there were reports in the US European grocery giant Ahold Delhaize - a business with significant operations Stateside - was eyeing a bid for Kroger, one of the largest retailers in the country.

Then, in France, Le Monde reported Amazon has been looking for acquisitions or a logistics deal in the country.

The Ahold Delhaize / Kroger reports were sparked by an anonymous tweet:

One should always be cautious about that kind of source, although some equity analysts covering Ahold Delhaize do see the logic in a such a deal.

Bruno Monteyne, an analyst covering European food retail stocks at Sanford Bernstein, is one of them, although he argued the timing may not be right, given the transaction that created Ahold Delhaize has only recently been finalised.

"There is strong strategic rationale for a deal - retail consolidation in the USA," Monteyne wrote in a note to clients. "The same rationale that drove the Delhaize merger, US consolidation, would drive this deal. The increased scale would make Ahold Delhaize-Kroger the leading US grocer with buying power and distribution efficiency in line with Walmart but much stronger in 'food experience' and online."

However, Monteyne argued a deal could be more likely pursued in a couple of years time, although he floated whether there could be opportunistic reasons to move sooner.

"Timing - practically better in 2-3 years' time, but there may be opportunity from sentiment?" he wondered. "Ahold Delhaize has made it clear that completing the Delhaize merger is their current priority. From a practical point of view doing such a deal would make more sense when the first deal is fully complete. Other considerations may be a catalyst to provide an early deal: shareholder pressure (possibly), liquidity issues (none at all) or opportunism: very possible given current share prices boards may be quite likely to approve something now."

Amazon, meanwhile, has refused to comment on the Le Monde report that claimed the e-commerce giant has been looking for physical store locations in Paris and had approached local grocers about the possibility of logistics deals or acquisitions. French grocers said to have been approached are Casino, Intermarche and Systeme-U.

In a separate report, Michel-Edouard Leclerc, the CEO of another major French grocer, E.Leclerc, said his company had been contacted by Amazon.

“Yes, we have been approached by Amazon,” M. Leclerc told Reuters yesterday. “Amazon could - why not? - be our logistics partner."


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