Canadian artificial‑intelligence startup Cohere disclosed on Friday that it will acquire Germany‑based Aleph Alpha, forming a new entity valued at about $20 billion. The deal, which still requires clearance from shareholders and competition authorities, places Cohere in charge of the combined operation while retaining Aleph Alpha’s 250‑person team and its expertise in European‑language models.

Schwarz Group, the German retail conglomerate, will inject €500 million (roughly $600 million) in structured financing and serve as the lead investor in Cohere’s upcoming Series E round. In return, the new venture will run on STACKIT, the sovereign‑cloud service operated by Schwarz Digits, giving the retailer a marquee enterprise customer for its cloud business.

Both firms pitch the merger as a step toward “sovereign AI” – systems that let companies and governments keep full control of their data instead of routing it through U.S. giants such as Microsoft or Google. Cohere’s CEO Aidan Gomez emphasized that the combined company will target sectors where data privacy and security are paramount, including defense, energy, finance, healthcare, manufacturing, telecommunications, and the public sector.

Cohere entered 2025 with $240 million in annual recurring revenue, while Aleph Alpha had generated little revenue and posted sizable losses. Investors, however, see the partnership as a way to close the gap with larger rivals like OpenAI, Anthropic and Google. The financing package and the backing of a major European retailer signal confidence that the new entity can scale its models and win enterprise contracts that demand a non‑U.S. AI supplier.

"Their focus on small language models, European languages and tokenizers complements our work on larger, general‑purpose models," Gomez said at a press conference in San Francisco. He added that the venture will operate as a Canadian‑German company, though future public‑market listing could dilute that national identity.

The move comes as other AI startups explore consolidation. Elon Musk’s xAI has reportedly discussed a three‑way partnership with France’s Mistral AI and the startup Cursor, illustrating a broader trend of smaller players teaming up to compete with the sector’s megacorporations.

Regulators in both Canada and Germany have signaled support for the deal, viewing it as a way to bolster domestic AI capabilities and reduce strategic technology dependencies on the United States. If approved, the combined firm will become a primary supplier of sovereign AI solutions to European and North‑American enterprises seeking alternatives to the dominant cloud‑based services.

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