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International retail conglomerates Ahold and Delhaize Group have each confirmed that they're in preliminary discussions "to explore the opportunity of combining the two companies." The statements came after numerous press accounts citing an anonymous source close to the matter.
Following the press reports, the shares of both companies surged by double digits.
Weighing the pros and cons of such a move, analysts have cited as pluses a close geographic fit between the two entities -- both, for instance, have a sizable U.S. presence -- and an increase in bargaining power with suppliers, while others have pointed out that merging Europe-based supermarket companies have a poor track record, offering, among other examples, Ahold's own acquisition of Serbian retailer Delta Maxi in 2011, widely regarded by observers as unsuccessful, due in large part to the weak Serbian economy.
This isn't the first time reports have surfaced of a potential link-up between Ahold and Delhaize: Back in 2006, some activity in that area was the subject of press speculation in the wake of Ahold’s near-disastrous accounting scandal at its U.S. foodservice operations.
Over the past few years, as the Charlotte, N.C., Observer has noted, Brussels-based Delhaize has onboarded new management and restructured its board to break free of the influence of its founding family, thereby making a merger with Ahold more likely. Former CEO Pierre-Olivier Beckers, a descendent of one of the company’s founders, was succeeded in 2013 by Frans Muller – a native of the Netherlands, Ahold’s home country -- and is now stepping down from the board, leaving just one director with ties to the founders. The board is also more international than previously, featuring more Americans and executives from such multinational companies as Unilever.
Both Ahold and Delhaize cautioned that the talks would not necessarily lead to a "future transaction," adding that they would provide "material updates, if any, in accordance with regulatory requirements." Ahold USA Inc. ranked No. 5 in Progressive Grocer’s 2015 Super 50 listing of top supermarket retailers, while Delhaize came in at No. 7.