Ahold and Delhaize resurrect merger moves

Dutch supermarket Ahold and Belgian rival Delhaize have discussed a potential tie-up, in a move that sent shares in both groups soaring but left some analysts perplexed.

The retailers have engaged in preliminary talks about a merger, according to people familiar with the situation, who stressed that talks were at an extremely early stage.

"Don't expect anything shortly, if at all," said one person involved.

Shares in Delhaize jumped up to 20 per cent on Monday after reports of the potential move appeared in the Belgian press. Meanwhile, Ahold - which is almost double the size with a market capitalisation of €16bn - gained 15 per cent at one point.

A tie-up between the groups has long been discussed, with talks throughout the 1990s, as well as in 2006 and 2008. There is not much crossover between their operations in Belgium, the Netherlands and Luxembourg.

But both have significant businesses in the US, which make up more than half of sales at both companies. Ahold owns Giant, Peapod and Stop & Shop, while Delhaize operates Food Lion and Hannaford.

The buoyant market reaction was met with scepticism by some observers.

Analysts at Bernstein said: "We see no reason to celebrate and worry about the bankers winning the upper hand over the commonsense of a well-grounded food retailer."

Highlighting the mixed record of acquisitions by supermarkets such as WM Morrison in the UK, Bernstein analysts said: "Big M&A in food retail doesn't work."

Analysts at Rabobank were more optimistic and suggested that a deal could result in savings of €1bn, while boosting the combined group's pricing power in the US.

Barclays said Ahold would be unwilling to pay much of a premium for Delhaize, meaning that a "genuine merger" could be on the table. The investment bank also raised the possibility of spinning off the US divisions of both companies.

Jefferies said a lack of structural growth at both groups meant that a deal at some point was "high".

At the end of April, Delhaize reported a 2.2 per cent rise in sales for the first quarter to €5.8bn as an improved performance in the US helped offset its struggling domestic business. Revenues at Ahold, which is yet to post its first quarter numbers, grew 2.6 per cent to €8.1bn in its final quarter.

Ahold has spent the bulk of the past decade recovering from an accounting scandal after it overstated profit by more than $500m, in a similar scandal to the one that hit Tesco last year. Since then, the Dutch retailer has focused on building up a significant online business.

The discussions were first reported in the Belgian press. Both groups declined to comment.

Shares in both groups pared their gains throughout the day. Ahold closed up 5.5 per cent at €18.18, while Delhaize ended the day up 14.5 per cent at €82.00.

© The Financial Times Limited 2015. All rights reserved.
FT and Financial Times are trademarks of the Financial Times Ltd.
Not to be redistributed, copied or modified in any way.
Euro2day.gr is solely responsible for providing this translation and the Financial Times Limited does not accept any liability for the accuracy or quality of the translation