Delhaize Group And Ahold Agree To Merge

(RTTNews) - Belgian food retailer Delhaize Group (DEG) and Dutch supermarket chain Koninklijke Ahold NV (AHONY, AHODF) agreed Wednesday to combine their businesses that will create a complementary base of more than 6,500 stores. The deal is expected to close in mid-2016.

Following the closure of the transaction, Ahold shareholders will own about 61 percent and Delhaize shareholders will own about 39 percent of the combined company's equity.

The two companies had confirmed in mid-May that they were in preliminary discussions to combine the two companies. Ahold also confirmed Tuesday that it was in the final stages of negotiations with Delhaize.

The merged entity, to be named Ahold Delhaizee, will be headquartered in the Netherlands. It will have a portfolio of local brands with more than 375,000 associates serving more than 50 million customers every week in the U.S. and Europe. Ahold Delhaize will be listed on the Amsterdam Stock Exchange and the Brussels Stock Exchange

The merger is expected to add to earnings per share in the first-full year after completion, with anticipated run-rate synergies of 500 million euros per annum to be fully realized in the third year after completion. One-off costs of the merger are estimated to be 350 million euros.

"This is a true merger of equals, combining two highly complementary businesses to create a world-leading food retailer. The transaction delivers a compelling value proposition for our shareholders, a superior offering for our customers and attractive opportunities for our associates," Ahold Chairman Jan Hommen and Delhaize Chairman Mats Jansson said in a statement.

The deal will see Delhaize shareholders receiving 4.75 Ahold ordinary shares for each Delhaize ordinary share held by them.

The combined company is currently expected to adopt a dividend policy with a pay-out ratio of 40 to 50 percent of adjusted net income.

Ahold and Delhaize businesses reported aggregated net sales of 54.1 billion euros, adjusted EBITDA of 3.5 billion euros, net income from continued operations of 1.0 billion euros and free cash flow of 1.8 billion euros in 2014.

Ahold said it will terminate its ongoing share buyback program, and 1 billion euros will be returned to Ahold shareholders via a capital return and a reverse stock split before concluding the merger.

Following the closure of the merger, Delhaize Chairman Mats Jansson will become the chairman of Ahold Delhaize and Ahold CEO Dick Boer will become its CEO. Meanwhile, Delhaize CEO Frans Muller will become deputy CEO.

Ahold Chairman Jan Hommen and Delhaize Director Jacques de Vaucleroy will become Vice Chairmen of Ahold Delhaize.

Ahold's financial advisors for the merger transaction are Goldman Sachs International and J.P. Morgan. For Delhaize, Bank of America Merrill Lynch and Deutsche Bank are acting as joint lead financial advisors.

Delhaize shares closed on Tuesday in Brussels 88.03 euros, up 6.03 euros on a volume of 0.63 million shares, and Ahold shares closed in Amsterdam at 18.96 euros, up 0.28 euros on a volume of 5.81 million shares.