Cohere acquires Aleph Alpha to build European alternative to U.S. AI providers

Cohere, a Canadian AI startup previously valued at $6.8 billion, is acquiring Aleph Alpha, a German AI company, in a transaction backed by Schwarz Group, the retail conglomerate that owns Lidl. The deal has received approval from both Canadian and German authorities. Schwarz Group, already a shareholder in Aleph Alpha, will serve as lead investor in Cohere's Series E funding round, committing €500 million in structured financing and anchoring the combined entity's growth.

The merger values the combined company at approximately $20 billion, according to German business publication Handelsblatt—a substantial valuation premium over the companies' standalone market positions. Cohere reported $240 million in annual recurring revenue in 2025, while Aleph Alpha had generated minimal revenue and sustained significant operating losses prior to the transaction.

Schwarz Group's backing comes with a strategic condition: the merged entity will operate on STACKIT, Schwarz Digits' sovereign cloud platform. This arrangement gives the retail conglomerate a major enterprise customer for its cloud infrastructure business while ensuring the AI company's data infrastructure remains under European control.

The merged company intends to market itself as a sovereign AI provider, targeting customers in defense, energy, finance, healthcare, manufacturing, telecommunications, and the public sector. The strategy reflects growing demand from regulated industries and governments seeking AI tools that keep data within European boundaries and reduce reliance on U.S.-based providers like Microsoft and Google.

Aleph Alpha has previously developed specialized language models for European enterprises and public institutions, including the PhariaAI suite. Cohere CEO Aidan Gomez cited Aleph Alpha's competencies in small language models and European language tokenizers as complementary to Cohere's strength in general large language models. However, Aleph Alpha's strategic clarity declined after its cofounder and CEO Jonas Andrulis departed, potentially weakening its negotiating position.