Belgian supermarket group Delhaize has confirmed this morning it is in merger talks with Dutch contemporary Ahold.
It a short statement, Delhaize said it has “entered into preliminary discussions with Royal Ahold N.V. to explore the opportunity of combining the two companies.” Delhaize added that the discussions “may or may not” result in a deal being struck.
Share in Delhaize and Ahold rose by 15% and 5% respectively on Monday as news about a potential $25bn merger spread.
However, the potential deal was met with a large dose of scepticism from some analysts.
Analysts at Bernstein concluded: “Is there a merit to merging the two companies? No.”
“Cost savings in retail acquisitions or mergers are highest when there is a large overlap and local scale economics improve (supply chain, marketing, space rationalisation). In this case there is very limited local overlap.”
Concerns were also raised over the lengthy and complex potential head office integration process which would distract from the retailers’ core purpose of competing locally for customers.
Despite their European roots, both companies generate about more than of their sales in the US.
Delhaize Group is present in seven countries on three continents with a network of 3410 stores. The group it listed on NYSE Euronext Brussels and the New York Stock Exchange.
Ahold has 3,206 stores across Europe and US with 227,000 employees and is listed on the Euronext Amsterdam.