Ahold-Delhaize Food Retailing Merger Won't Be Easy to Bag

NEW YORK (The Deal) -- Dutch supermarket retailer Royal Ahold NV may have the upper hand in early-stage merger talks with smaller Belgian peer Delhaize Group SA  (DEG), but getting a deal done won't be easy.

The companies have stayed mum since last week's announcement of exploratory talks, reportedly initiated by Delhaize CEO Frans Muller amid concerns about shrinking margins and growing competition from discount chains like Germany's Aldi and Lidl, and even from Ahold itself in northern Belgium.

With no rival suitors for the Belgian company expected to emerge, a tie-up with Ahold may be Delhaize's best chance to grab back lost market share at home and jolt some life into its sagging online business where Ahold, led by CEO Dick Boer since March 2011, is way ahead following the purchase two years ago of leading Dutch e-commerce company Bol.com for €350 million (or $390.6 million).

But try telling that to Delhaize's powerful unions, who responded to previous restructuring measures and plans to lay off 2,500 workers in the next three years with nationwide store strikes, accompanied by bonfires in parking lots. The tactics worked, and in February the company said that dismissals would be limited to 1,800 employees and that it would close 10 rather than 14 unprofitable supermarkets as originally envisioned.

Though the unions have been relatively quiet since then, wildcat strikes have continued at individual stores and any deal with Ahold that smacks of further redundancies or cost cutting won't go down well.

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