Supermarket operators Ahold, Delhaize agree to merger: Reuters

(Reuters) — Dutch-based supermarkets operator Ahold (AHLN.AS) has reached a deal to buy Belgian peer Delhaize (DELB.BR), the companies announced on Wednesday, in a move that will create the sixth-largest food retailer in the United States and the biggest in Europe’s Benelux region.

In a joint statement, the two companies said Ahold would have a 61 percent stake in the merged entity, which will have 54.1 billion euros ($60.6 billion) in sales, more than 6,500 stores worldwide and complementary operations in the United States and Benelux.

Ahold, best known in Europe as owning the Albert Heijn chain of supermarkets in the Netherlands, is operator of Stop&Shop and Giant stores in the United States, while Delhaize owns the Food Lion and Hannaford chains.

The Dutch group said it would pay 4.75 shares for every Delhaize share, valuing Delhaize at about 9.3 billion euros ($10.4 billion), or 90 euros a share, based on closing prices on Tuesday.

However, Ahold said it would return 1 billion euros to its shareholders with a special dividend and reverse stock split prior to the merger.

Ahold shares were 2 percent higher at 19.34 euros by 0808 GMT (0408 EDT) on Wednesday, valuing the group at 17.3 billion euros, while Delhaize was off 4.3 percent at 84 euros, giving the Belgian company a market value of 8.7 billion euros.

“The deal looks good for Ahold shareholders, they are getting 1 billion euros in cash and paying only a 27 percent premium for Delhaize, well below some of the initial estimates,” said Bernstein analyst Bruno Monteyne.

Since merger talks were announced on May 11, shares in Ahold have gained more than 10 percent and Delhaize more than 20 percent.

The merged entity, which will be headed by Ahold Chief Executive Dick Boer, would gain 500 million euros in synergies annually from combining operations, to be reached by the third year after the merger, the companies said.

On a conference call, Delhaize Chief Executive Frans Muller, who is to become chief integration officer, declined to explain how those synergies would be achieved, saying the companies “need some time to figure out the detailing of the process.”

Analysts expect the companies will benefit from supply chain integration and cost savings from eliminating overlapping distribution centers on the U.S. east coast, where both companies have around two thirds of their sales.

The companies expect the deal to close in mid-2016 and Boer said he did not expect any difficulties receiving regulatory approvals.

“We’re really complementary to each other in most of our markets, that’s the uniqueness of this merger,” he said.

The announcement caps years of speculation about a tie-up between the two regional giants. Previous talks have failed, but analysts say the companies’ combined buying power could help strengthen their position against booming discount retailers.

In a note published before the deal had been finalised, Rabobank analysts said the increased size would help the firms differentiate themselves in the United States and build out their online shopping propositions.

“Synergies can be substantial in terms of purchasing and best practices but only if cultures fit, politics are limited and management teams really cooperate,” they said.

(Additional reporting by Robert-Jan Bartunek and Emma Thomasson; Editing by Greg Mahlich)