Ahold says Delhaize merger negotiations reach final stages

Royal Ahold NV is in the final stages of negotiation with Delhaize Group, indicating that a merger to create the fifth-biggest U.S. supermarket retailer is near.

No definitive agreement has been reached, Zaandam, Netherlands-based Ahold said Tuesday in a statement after Financieele Dagblad reported that a deal could be announced as early as this week. Ahold CEO Dick Boer would lead the combined company, of which Ahold would control about 60 percent, FD said, citing people it didn’t identify.

Delhaize shares were suspended in Brussels after gaining 8.4 percent from Monday’s closing price. The stock earlier rose as much as 11 percent. Ahold shares continued trading in Amsterdam until the close, rising 1.8 percent.

A Delhaize representative declined to comment.

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After years of speculation, the potential deal has been hastened by increased competition in the U.S. from discount retailers including Wal-Mart Stores Inc. Together, the European owners of the Stop & Shop and Food Lion chains have annual sales exceeding 54 billion euros ($60 billion) and more than 4 percent of the U.S. grocery market, according to Natixis research. The merged business will also be Europe’s fourth-biggest food retailer, Natixis said.

The combination would be the biggest for the food retail industry in almost a decade and analysts project it could yield about 500 million euros in synergies, based on the average of four estimates. With those cost-cutting benefits, an all-stock merger with no premium would be more than 20 percent accretive to Ahold’s 2015 earnings per share, according to data compiled by Bloomberg.

An alternative to a merger is a takeover of Delhaize by Ahold. James Grzinic of Jefferies Group estimated an acquisition price of 115 euros a share for Delhaize, an additional 31 percent premium to the current stock price.

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