Columnist: No Sense in Ahold/Delhaize Deal
Jay Hancock, a columnist with the Baltimore Sun, doesn’t get it. What about a rumored merger between Ahold and Delhaize makes any sense at all?
For one, who knows what the combined company would look like after the Justice Department’s antitrust group got finished paring the company back?
Even if the Justice Department were to require minimal changes, the cultures of the two companies would make a merger’s success highly unlikely.
Food Lion (Delhaize), Mr. Hancock writes, “has Southern roots, smaller stores, short inventory lists and a long history of hostility to unions.” Ahold’s supermarket chains in the U.S. are all organized with employees belonging to the United Food and Commercial Workers (UFCW) union.
As with other rumored and actual merger, the S word (synergies) has been used with the suggestion that the combined companies would find savings in logistics, distribution and store operations.
According to Mr. Hancock, “It’s true that some sort of half-sensible deal could be sketched on a napkin.”
What is more likely to happen, he writes, is “cost saving from combining the operations (and probably closing some stores) would be disappointing.” The reason, as he sees it, is the amount of time and resources required to fix what is broken (especially at Ahold) would make the synergies seem inconsequential in the final analysis.
Ahold, he writes, has been looking to find a strategy that will help the various chains it owns regain some of their past glory. Unfortunately, innovation has been in short supply.
Food Lion, on the other hand, has made some encouraging deviations from its standard cookie cutter store concept with the recent development of its Bloom (upscale) and Bottom Dollar (limited assortment) formats.
Mr. Hanock expressed concern that the “energy consumed by melding the units might cause the Delhaize merchants to take their eyes off the customer… The danger for shoppers is that a merger might transfer Ahold’s drift and lack of focus to Delhaize rather than infuse Ahold with Delhaize’s discipline.”
Discussion Question: What are your thoughts on the suggested deal combining Ahold and Delhaize’s businesses in the U.S.?