ZAANDAM, NETHERLANDS & SINT-JANS-MOLENBEEK, BELGIUM - Sources in Europe have reported that Ahold and Delhaize have begun discussions on a possible merger, and the stock market has responded with a big jump.
Financial newspapers De Tijd and L'Echo quoted several unnamed sources, saying the talks were still in a preliminary phase. Speculation about a merger of the two supermarket chains dates back to at least 2006, but upon news of the reignited talks, shares in each companies soared again. Ahold shares jumped nearly 18 percent and Delhaize shares rose 15 percent.
While the financial world is all abuzz about the potential merger, analysts are not so convinced it will be the right move for the companies.
Bruno Monteyne, Senior Analyst at Sanford C. Bernstein, said that savings from the merger would be limited, because the companies were “neighboring" chains and not direct and overlapping rivals.
"I think there's very little merit in the deal in the past and today. Large food retailers rarely ever do successful mergers. In this case of Delhaize and Ahold it is probably the worst kind of combination," Monteyne continued.
Analysts at Rabobank were more optimistic about the news, suggesting to The Financial Times that a deal could result in savings of €1 billion, while boosting the combined group’s pricing power in the United States. Currently, both companies have more than half their sales tied up in U.S. businesses.
While this merger was previously discussed in 2006, some believe management changes and an overhauled board at Delhaize makes a follow-through much more likely. Frans Muller was appointed Chief Executive of Delhaize in 2013, replacing Pierre-Olivier Beckers-Vieujant, a descendant of company Co-Founder Jules Vieujant.
The Charlotte Observer reports that Beckers-Vieujant will be leaving the board after 20 years, leaving only one director left with ties to the founding family. Members of the family still own about 20 percent of the shares, but their ties are mostly financial, not managerial.
“I think that management teams are different now,” Patrick Roquas, an analyst for Rabobank, told The Charlotte Observer. “Delhaize’s current board has a different approach than management in 2007.”
Stay tuned as AndNowUKnow continues to follow this potential merger.
