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As we ponder the fate of yet another significant merger to be added to the books in 2015, the timing of the deal between Ahold and Delhaize was more than a bit interesting for us, given that we’d been planning for several months to run the first installment of our new Profiles in Progress series on Food Lion in our soon-to-publish July issue.
The Food Lion profile — which probes the regional chain’s aim to reclaim its roar — came to pass after I attended an analyst and media day hosted by Delhaize Group in March primarily targeting reporters from the company’s native Belgium. While I’d been adequately versed on the more aggressive stance Delhaize was taking to improve its American stores prior to my visit, I walked away feeling quite impressed by both the vision and vigor the company’s new leaders were applying to the Food Lion and Hannaford divisions.
Yet while those big plans are now obviously subject to change after the widely anticipated $28 billion deal — which is set for a mid-2016 wrap-up and has seemed all but inevitable dating back to 2006, when both companies were close to combining before Delhaize walked away after its demand for a merger of equals was denied — it would seem more than a little silly to scrap the transformative strides that Food Lion and Hannaford are making in the customary merger mandates of maximizing synergies and efficiencies of scale.
Unlike some of the more complex and precarious deals that have gone down in the past year, the Ahold-Delhaize alliance was not only likely, but also logical. The tricky part, of course, is the success with which the parties will put the pieces in place over the course of years, some of which are bound to be difficult fits. But there’s always a promise that something good will ultimately come from it, and so it goes with the pending nuptials of Delhaize and Ahold.
From a geographic standpoint, while antitrust issues tend to loom large with mergers of this magnitude, only a handful of key markets along the prospective partners’ expansive East Coast footprint are facing anticompetitive issues. Other big pluses are Ahold’s market-leading position in the Netherlands and Delhaize’s second-ranked standing in Belgium (where Ahold also has a modest 30 stores).
“Consumers will likely benefit from more competitive prices and improved selection over time,” notes Keith Anderson, VP of strategy and insights for Boston-based Profitero. If all goes well, “Ahold’s expertise and capability in e-commerce, applied to Delhaize’s footprint,” can also accelerate the combined entity’s growth online in both Europe and North America, adds Anderson, in light of Ahold’s ownership of Peapod, the longest continuously operating online grocer in the United States, and Bol.com, a leading online retailer in the Netherlands.