Cohere, Aleph Alpha combine to target enterprise AI market

(Corrects from "this year" to "last year" in para 9)

By Leo Marchandon

Sept 16 (Reuters) - Canada's Cohere and Germany's Aleph Alpha signed a definitive merger agreement on Wednesday, the AI companies said. 

The combined business will operate as Cohere, with dual headquarters in Toronto and Berlin, while Aleph Alpha's Heidelberg office will focus on research. Aleph Alpha co-chief Ilhan Scheer will become chief operating officer of Cohere.

The merger brings together a Canadian AI model developer and a German company that has increasingly focused on helping governments and businesses deploy artificial intelligence. The companies said demand was growing for AI systems that can operate within a customer's own infrastructure and comply with local regulatory requirements.

Cohere CEO Aidan Gomez said the tie-up aimed to meet demand for AI "powerful enough to compete, but secure and governable enough to trust."

The plan was first disclosed in April, a combination valued at around $20 billion (€17.34 billion) at the time. Lidl-owner Schwarz Group is investing €500 million in the new entity. The companies did not disclose updated financial terms and said the transaction remained subject to regulatory approvals.

The deal comes as European AI companies attract fresh investment. Mistral, Europe's lead model maker, last week raised €3 billion at a valuation of more than €21 billion.

Cohere develops Command, a family of open source AI models designed to run inside a customer's own computing environment, positioning the company to serve businesses, governments and public administrations rather than consumers.

Aleph Alpha, once touted as Germany's AI champion, stepped back from developing frontier AI models and refocused on AI integration software. Co-founder Jonas Andrulis left the company earlier this year after relinquishing the chief executive role in 2025.

Cohere reported $240 million in annual recurring revenue last year, while Aleph Alpha reported revenue of less than 1 million euros in 2023, according to its latest public accounts.

The companies said Schwarz Group would provide computing capacity through its cloud arm StackIT. The retailer is investing between €11 billion and €13 billion in a German data-centre campus expected to house up to 100,000 AI chips.

(1 euro = $1.1535)

(Reporting by Leo Marchandon in Gdansk; Editing by Matt Scuffham)