AN M&A DEAL THAT COULD BE A TOUGHER to push through is the possible combination of food retailers Royal Ahold (AH.Netherlands) and Delhaize (DELB.Belgium).
The companies confirmed May 12 that they are in preliminary discussions that could lead to the creation of a grocer with 54 billion euros ($61.56 billion) in annual sales and leading positions in the Netherlands, Belgium, and the east coast of the U.S. Ahold, which owns Stop & Shop, could offer a 30% to 40% premium to Delhaize’s share price before the talks were disclosed. Delhaize operates Hannaford and Food Lion.
That translates to a takeout price of €94 and €101. Based on Delhaize’s closing price Friday of €83.58, that would represent a premium of 12.5% to 20.8%. Its ADRs (DEG) were trading above $23.
A merger seems to make sense, with analysts at Société Générale calculating potential synergies at €540 million, and value creation at €11 billion. But they caution that the most recent deals in the sector have been disappointing.
Delhaize’s stock was discussed favorably in this column last year (“Time to Put Delhaize in Your Cart,” April 7). It is up about 60% since then, but it still could have a way to go. Investors might want to make space in their shopping carts.