Photographer: Jasper Juinen/Bloomberg

Delhaize, Ahold Shares Advance as Merger Talks Said to Progress

Delhaize Group and Royal Ahold NV rose in early European trading after Bloomberg reported that merger talks between the Belgian and Dutch grocers are progressing, with the goal of reaching an agreement by the end of the month.

Delhaize gained as much as 5.3 percent to 83.20 euros in Brussels, extending its advance since talks were first reported last month to 15 percent. Ahold shares climbed as much as 2.4 percent to 18.67 euros in Amsterdam.

Company executives and their advisers are busy negotiating the structure of a deal and annual cost savings of 300 million euros ($334 million) to 700 million euros as they aim for a deal before the summer break starts in July, according to people familiar with the matter.

While both sides are optimistic about the chances of an agreement, negotiations could still fall apart. Representatives for Ahold and Delhaize declined to comment.

The retailers are discussing annual savings related to purchasing, supply chain and overlaps in administration and headquarters, said the people, who asked not to be identified because talks are private. They do not see significant store closures because there’s little geographic overlap in Europe and the U.S., according to the people.

The companies are negotiating the structure of the deal, which currently foresees either an all-share transaction, giving investors upside if cost savings are met or exceeded, or a mix of shares and some cash, the people said. An all-cash deal isn’t planned. Discussions also include how to divvy up management roles, they said.

Ahold and Delhaize announced on May 12 that they were in merger talks to potentially create the fifth-biggest U.S. supermarket retailer amid increased competition from Wal-Mart Stores Inc. The discussions are “preliminary” and may not result in a transaction, the European owners of the Stop & Shop and Food Lion chains said in separate statements at the time.

Combining Zaandam, Netherlands-based Ahold and Brussels-based Delhaize would create a business that accounts for more than 4 percent of the U.S. grocery market, analysts at Natixis have said. In Europe, the merged business would become the fourth-biggest food retailer, Natixis said.

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