Will grocery merger boost Giant, Food Lion?
In $10B deal, Ahold Delhaize hopes to cut $500MM in yearly costs
Royal Ahold NV, the Dutch grocery holding company that owns Giant stores (both the Carlisle-based non-union chain that has expanded rapidly in the Philadelphia area and the Landover, Md.-based union-labor chain with stores as close as Wilmington) and Stop & Shop, has agreed to pay $10 billion for Belgium's smaller Delhaize Group. (Revised and expanded:)
Delhaize owns Food Lion stores down South and Hannaford up north. The company recently shut its Bottom Dollar discount groceries in Pennsyvlania, New Jersey and Ohio, just four years after entering these markets. (German-owned rival Aldi has reopened some of those stores.)
The deal combines two large but slow-growing Euro chains whose business is mostly in the U.S. Ahold's largest U.S. division Giant-Landover, with over $5 billion in yearly sales, suffered a "dismal" 2014, while Food Lion is coming off "a decade of declining revenue" as rival Wal-Mart gains market share, Food Trade News says here, adding that Giant-Carlisle, while smaller, has been Ahold's "best-performing" U.S. chain.
The deal arrives (pending regulatory approval in Europe) as former U.S. regional grocery chains are being swapped around by buyout investors and pressured by Wal-Mart and other mass retailers. Ahold and Delhaize (which claims they are joining as "equals") hope to cut more than half a billion dollars a year in operating costs by 2019.
Combined sales total nearly $60 billion; net income, more than $1 billion; share value, nearly $30 billion. The chains jointly employ 375,000 at 6,500 stores (including 2,000+, mostly larger, U.S. locations) before merger-related closings and layoffs, and claim 50 million customers, the majority in the U.S. Ahold will pay 4.75 shares for each Delhaize share, and Ahold owners will hold more than 60% of the combined Ahold Delhaize group.
To sweeten the deal, Ahold is cancelling its share buybacks and sending shareholders $1 billion. Delhaize chair Mats Jansson will chair the combined board. Ahold CEO Dick Boer will run the combined company, with Delhaize boss Frans Muller as his deputy and "Chief Integration Officer" overseeing the merger.
In other chain-grocery news, Wegmans, whose big stores with their ready-prepared meal section have proven popular in the Pennsylvania and South Jersey suburbs, has bypassed Philadelphia but plans a store in New York's Brooklyn, Food Trade News reports here.