Cohere and Aleph Alpha Sign Definitive Merger Agreement to Form Roughly $20 Billion Transatlantic AI Company

Canada's Cohere and Germany's Aleph Alpha have signed a definitive merger agreement, the two AI companies said, moving forward on a combination first disclosed in April that a term sheet reported by German outlet Handelsblatt pegged at roughly $20 billion, according to Yahoo Finance and TechCrunch. The combined business will operate under the Cohere name with dual headquarters in Toronto and Berlin, while Aleph Alpha's Heidelberg office shifts its focus to research, Yahoo Finance reported.

The companies did not disclose updated financial terms at signing and said the transaction remains subject to regulatory approvals, per Yahoo Finance's reporting.

Deal Mechanics and Ownership

According to TheNextWeb, Cohere's shareholders are set to receive approximately 90% of the combined entity, with Aleph Alpha's shareholders receiving approximately 10%, a split TheNextWeb characterized as making the transaction "effectively a Cohere acquisition in merger framing." That is a gap of 80 percentage points (90 minus 10), or nine times Aleph Alpha's share (90 divided by 10), by our calculation using the two reported figures. Cohere was last valued at approximately $7 billion following a September 2025 funding round, while Aleph Alpha was valued at around €2.7 billion, or roughly $3 billion, after its November 2023 raise, TheNextWeb reported. TechCrunch separately cited Cohere's most recent valuation at $6.8 billion. The reporting reviewed here does not describe the exchange mechanics or the consideration structure behind that split.

Aleph Alpha's weaker negotiating position traces to a strategic pivot: the company stepped back from developing frontier AI models to focus on integration software, and co-founder Jonas Andrulis left earlier this year after relinquishing the CEO role in 2025, according to Yahoo Finance and TechCrunch. TechCrunch noted that despite this, Aleph Alpha's 250-person team and its expertise could still complement Cohere. Under the new structure, Aleph Alpha co-chief Ilhan Scheer will become chief operating officer of Cohere, Yahoo Finance reported.

Schwarz Group's Capital and Compute Commitment

Lidl-owner Schwarz Group, an existing Aleph Alpha shareholder, is committing €500 million (approximately $600 million) in structured financing as lead investor in Cohere's upcoming Series E round, according to Cohere's own announcement and TechCrunch's reporting. Separately, Yahoo Finance reported that Schwarz Group will supply computing capacity through its cloud arm StackIT and is investing between €11 billion and €13 billion in a German data-centre campus expected to house up to 100,000 AI chips. That data-centre spending is a distinct, larger commitment from the €500 million financing round, and the reporting does not specify how much of either figure has already reached the balance sheet versus remaining contracted future spend.

In return for its backing, Schwarz Group expects the combined entity to run on STACKIT, the sovereign cloud platform operated by its Schwarz Digits division, TechCrunch reported, giving the retailer a major enterprise cloud customer. Schwarz Digits Co-CEOs Rolf Schumann and Christian Müller said in a joint statement carried by Cohere that the investment positions the companies of Schwarz Group "as lead investors for digital sovereignty and infrastructure," with STACKIT serving as "the technical backbone of this transatlantic AI initiative."

Revenue Gap and Competitive Backdrop

The two companies enter the merger with starkly different commercial scale. Cohere reported $240 million in annual recurring revenue this year, while Aleph Alpha reported revenue of less than €1 million in 2023, its latest public accounts, alongside significant losses, according to Yahoo Finance and TechCrunch. TheNextWeb reported that the combined entity will compete with OpenAI, Anthropic, whose ARR has reached $30 billion, and Google, all of which are aggressively targeting European enterprise and government customers. TheNextWeb also cited the Globe and Mail's assessment that "the new entity will still face huge challenges competing against deep-pocketed US rivals."

The merger also lands amid a wave of European AI fundraising. Yahoo Finance reported that Mistral, described as Europe's leading model maker, raised €3 billion the week before the definitive agreement at a valuation of more than €21 billion.

Regulatory Path and Timeline

The Financial Post reported at the April announcement that the deal remained subject to regulatory approval and was expected to close "in the coming months," while TechCrunch reported that the transaction requires approval from both authorities and shareholders. Yahoo Finance reported at signing that the transaction remained subject to regulatory approvals. Neither outlet named the specific approval regimes involved, and no detailed closing timeline beyond that general window has been reported.

Backers, Customers and Political Staging

Cohere brings an established enterprise customer base including Royal Bank of Canada, Fujitsu and LG CNS, a strategic partnership with Microsoft, and a recent memorandum of understanding with Saab on the GlobalEye defence programme, according to TheNextWeb. Aleph Alpha's backers include SAP, Bosch, Schwarz Gruppe and Hubert Burda Media, and the company received strong endorsement from the German federal government during its 2023 fundraising, TheNextWeb reported.

The announcement itself was staged in Berlin with Germany's Digital Minister Karsten Wildberger and Canada's AI and Digital Innovation Minister Evan Solomon both in attendance, a detail TheNextWeb said "underscores the extent to which this is a geopolitical deal as much as a commercial one." The German government is set to become an anchor customer, per TheNextWeb. The merger follows a Sovereign Technology Alliance signed by Canada and Germany earlier this year to "strengthen sovereign AI capacity and reduce strategic technology dependencies," TechCrunch and TheNextWeb reported.

Cohere CEO Aidan Gomez said the combination "accelerates our global expansion and advances our mission to deliver sovereign AI to nations around the world," adding that "organizations globally are demanding uncompromising control over their AI stack," according to Cohere's own announcement. Gomez told a press conference, as reported by TechCrunch, that "Cohere will become a Canadian-German company," and described Aleph Alpha's focus on "small language models, European languages and tokenizers" as complementary to Cohere's "general focus on large language models." Aleph Alpha Co-CEO Ilhan Scheer said in the same Cohere announcement that the companies are "building a real counterweight for organizations that refuse to outsource control over their AI to a single provider or jurisdiction."

The Sovereignty Question

TheNextWeb raised a pointed question that the deal's own structure invites: whether a company with roughly 90% Canadian ownership and Toronto-based leadership genuinely qualifies as "European sovereign AI" under the procurement rules and political definitions that European governments and enterprises will eventually have to apply. TechCrunch framed the same tension as a question of whether European organizations will view the initiative as sufficiently sovereign or will simply trust that the transatlantic alliance holds over time. Cohere's own materials cite a McKinsey estimate from March 2026 projecting the global AI services market will surpass $1 trillion annually, with sovereign AI needs representing nearly $600 billion of that total, a market opportunity that helps explain why both governments and Schwarz Group are treating the deal as strategic infrastructure rather than a straightforward corporate transaction.

Bottom Line

The Cohere-Aleph Alpha merger combines a commercially ahead but comparatively small Canadian AI vendor with a struggling German rival, wrapped in explicit government backing and a sizable European compute buildout financed by Schwarz Group. The lopsided 90-10 ownership split reported by TheNextWeb, Aleph Alpha's negligible 2023 revenue, and the unresolved question of whether Toronto-led leadership counts as "sovereign" European AI all suggest the deal's political symbolism may currently outpace its commercial substance, at least until regulators clear the transaction and the combined entity discloses how its revenue and customer base actually merge.