Delhaize, the parent company of Salisbury-based Food Lion, has agreed to a merger with Ahold, a Dutch retailer that operates the U.S. supermarket chain Giant. The deal will create the fifth-largest supermarket operator in the U.S.
Ahold will buy Brussels-based Delhaize, which makes the majority of its revenue in the U.S., for about 9.32 billion euros, or $10.4 billion, worth of shares. The deal is expected to close in mid-2016, the two companies said in a statement Wednesday.
The combined company, which will be called Ahold Delhaize, will have more than 6,500 stores around the world. Ahold Delhaize will control more than 4 percent of the U.S. grocery market and will be the fourth-largest food retailer in Europe, according to Natixis research.
Food Lion employs 2,300 in its Salisbury headquarters. The merger’s impact on local employment wasn’t immediately clear, and the companies said coming up with a full integration plan will take time.
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Food Lion is the No. 3 supermarket chain in Charlotte by market share and operates 106 stores across the Charlotte region. Locally, Food Lion competes with Wal-Mart, which has been expanding aggressively with its Neighborhood Market concept, and Harris Teeter, which has been reducing prices since being bought by Kroger last year.
Ahold operates brands that include Stop & Shop, Giant Food, Giant Food Stores, Martin’s Food Markets and Peapod – none of which are in North Carolina, according to a presentation from the two companies.
The two companies said the merger will result in 500 million euros, or about $559.7 million, in cost savings over three years. In a conference call Wednesday, Delhaize Chief Executive Officer Franz Muller said the “synergies” will come from direct and indirect sourcing as well as general administrative and “other expenses.”
The bulk of the cost savings will be in sourcing – for example, combining suppliers – and most will come from the U.S., said Muller, who will be overseeing the cost-saving efforts. He did not say whether any stores will close, or what the employment impact will be.
“It is too early to comment on specifics regarding headquarter locations before a full integration plan has been put together,” Christy Phillips-Brown, a Food Lion spokeswoman, told the Observer.
Burt Flickinger, managing director of consumer industry consulting firm Strategic Resource Group, said the merger presents growth potential in the U.S. for Delhaize, which has about a dozen distribution centers in the U.S. between its Food Lion and Hannaford brands. In North Carolina, Food Lion has distribution centers in Dunn, Butner and Salisbury.
Ahold, on the other hand, outsources its distribution to a company called C&S Wholesale Grocers, which also supplies its competitorssuch as Target and A&P. Ahold could start using Delhaize’s centers, Flickinger said, and that could create jobs and “improve the quality and service of supply” to Ahold stores.
“They are the best anywhere in America in terms of logistics,” Flickinger said of Delhaize’s distribution network.
Flickinger also sees room for local growth of Ahold’s Peapod, an online grocery delivery service, given the rapid expansion of Amazon Fresh. He also said since its orders will be bigger, the combined company may be able to negotiate savings with vendors, and those could be passed on to customers in the form of lower prices.
The merger likely won’t run into antitrust problems with federal regulators since fewer than 5 percent of the combined company’s U.S. stores can be described as overlapping, Bloomberg reported, citing Barclays analysts.
Earlier this year, Delhaize praised the performance of its American stores as sales and profits slumped in Europe during the first quarter. For its Food Lion and Hannaford stores open at least a year, sales were up 2.5 percent.
Last year, Food Lion launched a new “customer-centric” way of training employees as well as a new store concept focused on fresh products and low prices called “Easy, Fresh and Affordable.” It has completed over 70 such renovations this year so far and plans for 160 more in the Raleigh market this year.
Food Lion’s local roots run deep. The company was founded in Salisbury as Food Town in 1957, and Delhaize acquired its first stake in the company in 1974. In 1982, Food Town changed its name to Food Lion. Delhaize’s logo is a lion.
The supermarket chain operates 1,100 grocery stores in 10 Southeastern and mid-Atlantic states.