Merger talks between Royal Ahold and Delhaize Group are progressing as the Dutch and Belgian companies seek to reach an agreement as early as this month to create a grocery giant with $60 billion in sales, according to people familiar with the matter.
Company executives and their advisers are busy negotiating the structure of a deal and annual cost savings of €300 million ($336 million) to €700 million as they aim for a deal before the summer break starts in July, said the people. While both sides are optimistic about the chances of an agreement, negotiations could still fall apart. Representatives for Ahold and Delhaize declined to comment.
The retailers are discussing annual savings related to purchasing, supply chain and overlaps in administration and headquarters, said the people, who asked not to be identified because talks are private. They do not see significant store closures because there’s little geographic overlap in Europe and the US, they said.
The two companies are negotiating the structure of the deal, which currently foresees either an all-share transaction, giving investors an upside if cost savings are met or exceeded, or a mix of shares and some cash, they said. An all-cash deal isn’t planned. Discussions also include how to divvy up management roles, the people said.
Ahold and Delhaize announced on 12 May that they were in merger talks to potentially create the fifth-biggest US supermarket retailer amid increased competition from Wal-Mart. The discussions are “preliminary” and may not result in a transaction, the European owners of the Stop & Shop and Food Lion chains said in separate statements at the time. Ahold shares have advanced 5.7 per cent since talks were first reported, while Delhaize has advanced 9.1 per cent.
Bloomberg News, edited by ESM
