Analysts have questioned the legitimacy of an ‘anonymous tweet’ reported yesterday, which suggested that Ahold Delhaize is lining up a bid for US retail giant Kroger.
According to the tweet, Ahold Delhaize has hired advisors to investigate making a bid for Kroger, at a rate of $32 per share. Kroger currently trades at $20-$21 a share.
Doesn’t Seem Reliable
Commenting on the proposed deal, Barclays European Food Retail Equity Research said, "While we are wary of categorically ruling out any M&A deals, the source in this instance does not – on the face of it – seem especially reliable.
"Ahold Delhaize has stated that it looks at US acquisitions, but its main focus has been on small, bolt-on deals. If anything, it is less interested right now, given that it is focused on squeezing synergies out of the Delhaize merger."
Timing Seems Off
Elsewhere, Bruno Monteyne of Bernstein Research said that while there is a "strong strategic and financial rationale" for such a deal, the structure and timing "seem off".
As Monteyne wrote in a briefing note, 'There is strong strategic rationale for a deal: retail consolidation in the USA. The same rationale that drove the Delhaize merger, US consolidation, would drive this deal. The increased scale would make Ahold Delhaize-Kroger the leading US grocer, with buying power and distribution efficiency in line with Walmart, but much stronger in "food experience" and online.'
However, he added, 'Ahold Delhaize has made it clear that completing the Delhaize merger is their current priority. From a practical point of view, doing such a deal would make more sense when the first deal is fully complete. Other considerations may be a catalyst to provide an early deal: shareholder pressure (possibly), liquidity issues (none at all) or opportunism: very possible – given current share prices, boards may be quite likely to approve something now.'
© 2017 European Supermarket Magazine – your source for the latest retail news. Article by Stephen Wynne-Jones. Click subscribe to sign up to ESM: The European Supermarket Magazine.