retail news in context, analysis with attitude

The Financial Times has a piece about the merger discussions currently taking place between Ahold and Delhaize, noting that the prospect of a deal has not generated universal enthusiasm.

"Supporters of the deal argue that there is now a stronger conviction that a combined group could deliver synergies and economies of scale," creating a "formidable" $28 billion retail entity "with branches stretching from the US to Europe and across to Indonesia," especially in the eastern US, where it would have stores from Maine to South Carolina.

But others argue that it is a bad idea, combining two entities that have been in decline, with "cost savings that would be hard to come by."

However, "with both companies struggling for growth and suffering increasingly squeezed margins, a deal may be necessary, according to some analysts." And one argument is that "combining the US businesses of Delhaize and Ahold and spinning them off may be profitable for shareholders."
KC's View:
I can't really argue with the notion that while this would be the combination of two very large companies, it is not exactly the combination of a couple of marketing juggernauts ... it does sort of sound like a deal that might be better in the short term for some investors than it would be, in the long run, for shoppers and employees.

I'm intrigued by the suggestion in the story that it is possible that this is really about the US businesses operated by both companies, and that they could be combined and spun off.

This does have the hint of inevitability about it ... though I continue to believe that the announcement of these discussions does open the door for other companies to get involved. Both companies are in play, and it remains to be seen if anyone else wants to get into the game.

The only problem with this theory, of course, is that there aren't a lot of companies left with the resources and inclination to go after Delhaize and/or Ahold.

I do think that if this is going to happen, it is going to happen fast.