Delhaize Investors Pull Short Straw as Merger Terms Favor Ahold

The pairing of Royal Ahold NV and Delhaize Group was no Dutch treat for Delhaize’s shareholders, as Ahold investors look to be the winners in a deal analysts say gives little premium to the Belgian retailer.

Delhaize shares dropped as much as 5.4 percent in Brussels Wednesday after the companies announced details of their plan to unite, while Ahold shares slipped 1.5 percent.

Delhaize shareholders get only a 2.3 percent premium to the price at which the stock was suspended Tuesday, and also receive none of the 1 billion euros ($1.1 billion) of cash that will be paid to Ahold investors as compensation for the termination of the grocer’s latest share buyback program.

For Delhaize to agree to the payout to Ahold shareholders “seems a puzzling step,” Jefferies analyst James Grzinic said in a note, adding that the share-exchange ratio of 4.75 Ahold shares to 1 Delhaize share was “wrong” for the Belgian company’s shareholders.

Even allowing for a rise in Delhaize shares since the companies said last month that they were in merger talks, the premium for shareholders is “well below some of the initial estimates,” Bernstein analysts said in a note.

The transaction values Delhaize at 10.07 times earnings before interest, tax, depreciation and amortization, according to data compiled by Bloomberg. That compares with a median of

9.4 times for similar deals over the last five years in Europe and North America, the data shows.

“It’s not an Internet company or biotech company with those crazy premiums, it’s a normal ongoing business,” Tom Muller, analyst for Theodoor Gilissen Bankiers, said by phone. “So I’d say a premium of over 20 percent, in comparison to the share price at the time, is very reasonable.”

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