* Ahold will take 61 percent of new company
* Merger creates major supermarket player in U.S., Europe
* Companies expect 500 million euros in savings
* Deal seen as necessary for companies to compete (Updates with analyst comment, more material on U.S. operations)
By Toby Sterling and Robert-Jan Bartunek
AMSTERDAM, June 24 (Reuters) - Dutch grocer Ahold has agreed to buy Belgian rival Delhaize in a 25 billion-euro ($28 billion) deal that will create one of the biggest food retailers in the United States and a major player in Europe.
The combination will bring four well-known supermarket chains on the U.S. east coast under the same umbrella: Ahold’s Stop & Shop and Giant stores and Delhaize’s Food Lion and Hannaford markets.
Together, the companies say, they will lower operating and purchasing costs to compete with Wal Mart and expand the reach of Ahold’s online grocery store Peapod, the largest such service in the United States, to compete with Amazon.
Ahold will take a 61 percent stake in the new company, which will have 54.1 billion euros ($61 billion) in annual sales from 6,500 stores worldwide, including more than 2,000 in the United States and the rest in the Netherlands, Belgium and eastern Europe.
The Dutch group will pay 4.75 shares for every Delhaize share, valuing Delhaize at about 9.3 billion euros, or 90 euros a share, based on closing prices on Tuesday.
That division is slightly more skewed in Ahold’s favour than analysts had expected, especially as Ahold shareholders will receive a capital return of 1 billion euros at the time the merger closes in 2016.
Delhaize shares fell 7.7 percent to 81.29 euros, while Ahold was off 3.7 percent at 18.26 euros.
Some analysts were skeptical about aspects of the deal, including potential cost benefits.
“We remain unconvinced of how much of the synergies can flow into profits and we remain particularly concerned with Ahold’s ability to defend its US operational performance ahead of the deal completing,” analysts at Jefferies said in a note.
“Agreeing to a 1bn Ahold share consolidation before a share exchange seems a puzzling step for Delhaize,” they said.
Since merger talks were announced on May 11, shares in Ahold have gained more than 10 percent and Delhaize more than 20 percent. Delhaize CEO Frans Muller said the terms were “a fair recognition of both companies’ “ value.
The deal should give the pair much-needed buying power in the fiercely competitive U.S. grocery market after a recent wave of consolidation, as well as help them face the threat posed by booming discounters such as Lidl in Europe.
The merged group would be Europe’s largest listed food retailer by market capitalisation, ahead of Tesco and Carrefour, which both have greater annual sales but have suffered severe margin erosion under pressure from discount chains.
Ahold, which operates the Netherlands’ dominant grocery chain Albert Heijn, derives almost two-thirds of its sales from its U.S. stores. Delhaize is Belgium’s biggest food retailer, but also gets two thirds of sales in the U.S.
Together, they account for almost 5 percent of the fragmented U.S. grocery market, behind Wal Mart, Kroger Co and the recently merged Albertsons/Safeway, according to market data firm Euromonitor.
Ahold and Delhaize have been squeezed in the United States by Wal Mart’s move to open more small-format stores as well as by Kroger’s purchase of North Carolina-based Harris Teeter.
Wal Mart plans to open another 180-200 small stores this year and Delhaize is seen as particularly exposed to the advance.
“Both businesses are weakly positioned for their respective long-term challenges in the U.S.. Given this backdrop, a combination of Ahold and Delhaize should provide both with greater staying power,” Jefferies analysts said.
Ahold Chief Executive Dick Boer, who will also lead the combined company, said he did not expect any difficulties receiving regulatory approval for the deal.
“We’re really complementary to each other in most of our markets, that’s the uniqueness of this merger,” he said.
One source with knowledge of the deal said they expected the firms to make small divestitures in the United States to overcome antitrust issues there.
Muller will become deputy CEO in the new company and oversee the integration.
A source familiar with the merger discussions said that Boer, 57, could step down within several years, opening the way for Muller to take the top job if the merger is successful.
“The Dutch realised the only way to do this was to have a 50-50 governance split,” he said.
The two firms are targeting annual cost savings of 500 million euros by three years after completion of the deal, with savings coming from combining supplier networks and distribution and leveraging scale in own-brand products.
One investor at an institution that owns a significant stake in Ahold said he would approve the merger.
“The deal creates value and a more solid combined company,” he said. “On the flip side, it also brings with it a risk of how successful they will be in integrating.”
The merger will also give Delhaize access to Ahold’s relatively strong online retail operation.
$1 = 0.8919 euros Additional reporting by Emma Thomasson, Freya Berry, Anthony Deutsch and Thomas Escritt; Editing by Greg Mahlich and Jane Merriman