Canadian AI startup Cohere, backed by Schwarz Group (parent company of grocery chain Lidl), will acquire Germany-based Aleph Alpha. The companies intend to benefit from governments around the world and provide companies with a sovereign alternative in an AI landscape dominated by American companies.
As companies that develop large-scale language models, Aleph Alpha and Cohere remain local stars, but globally they still lag far behind the likes of OpenAI. But similarities aside, this is not an alliance of equals. With a final valuation of $6.8 billion, Kohia will lead the new entity that will incorporate Aleph Alpha, subject to regulatory and shareholder approval.
Schwarz Group, one of Aleph Alpha’s major shareholders, has already given full consent to the transaction. The retail giant is now expected to become a strategic backer of the new company with 500 million euros (approximately $600 million) in structured financing and use STACKIT, the sovereign cloud service from IT arm Schwarz Digits.
As part of the investment, Schwarz Group is also acting as Cohere’s lead investor in its Series E round of funding, and has already set its price tag. According to German business media Handelsblatt, the term sheet pegs the valuation at about $20 billion.
This would be a significant jump that cannot be justified by total revenue alone. Cohere reported annual recurring revenue of $240 million in 2025, but Aleph Alpha had previously generated little revenue and significant losses. But investors are betting that teaming up will improve their odds.
They may not be the only ones who think so. Elon Musk’s AI startup xAI is in talks to form a three-way partnership with France’s Mistral AI and Cursor, with SpaceX reportedly recently picking up an acquisition option. But it remains unclear whether French companies are interested in risking the very status as an alternative to U.S. technology that has boosted their profits.
Cohere also expects tailwinds from companies looking for alternatives to AI providers that may not meet their requirements for privacy and independence. The new organization will target highly regulated industries such as defense, energy, finance, healthcare, manufacturing and telecommunications, as well as the public sector.
tech crunch event
San Francisco, California
|
October 13-15, 2026
Aleph Alpha has also developed specialized language models targeted at European businesses and public institutions, including the PhariaAI suite. A subsequent pivot and the departure of co-founder and CEO Jonas Andrulis has left its strategy and leadership less clear, but its team of 250 employees and its expertise could still complement Cohere.
“Their focus on small-scale language models, European languages, and tokenizers is really complementary to our general focus on large-scale language models,” Cohere CEO Aidan Gomez said at a press conference announcing the plans on Friday.
The lineup at the press conference also showed this. Joining Gomez on stage with Rolf Schumann, Schwarz Group’s chief digital officer, was Aleph Alpha’s co-founder Samuel Weinbach, not its co-CEO. The event also featured German Digital Minister Carsten Wildberger and Canadian Digital Minister Evan Solomon.
Amid rising tensions with the United States, Canada has become increasingly keen to sign bilateral initiatives with various partners, including Germany. Driven by shared concerns about privacy and security, the two countries recently launched the Sovereign Technology Alliance, which aims to “strengthen sovereign AI capabilities and reduce dependence on strategic technologies.”
The question remains whether European institutions will consider initiatives involving Canada sufficiently sovereign, or whether they believe that the transatlantic alliance will be maintained in the long term. “Cohere will be a Canadian-German joint venture,” Gomez said. But if an IPO is still planned, ownership can quickly become unclear.
If you buy through links in our articles, we may earn a small commission. This does not affect editorial independence.
