In a move that screams 'we're definitely not American, we promise,' Canadian AI startup Cohere is taking over Germany-based Aleph Alpha, with the enthusiastic blessing of both governments and the financial muscle of Schwarz Group - the parent company of grocery chain Lidl. The goal is to offer enterprises a sovereign alternative in an AI landscape currently dominated by U.S. players, because nothing says independence like a cross-Atlantic merger backed by a discount supermarket empire.
Both companies develop large language models and have been hometown stars, though that's like being the tallest kid in a kindergarten class - globally, they lag far behind OpenAI and its ilk. But this isn't an alliance of equals. Cohere, last valued at a tidy $6.8 billion, will lead the new entity that incorporates Aleph Alpha, pending approval from authorities and shareholders. Schwarz Group, already one of Aleph Alpha's main shareholders, is fully on board and will now become a strategic backer of the new entity with €500 million (roughly $600 million) in structured financing - and with the expectation that the combined company will use STACKIT, the sovereign cloud service of Schwarz Digits, because nothing says 'sovereign' like being locked into a specific cloud provider.
As part of its investment, Schwarz Group is also acting as Cohere's lead investor in its Series E round, and it already set the price tag. According to German business media Handelsblatt, the term sheet anchors the valuation at around $20 billion. That's a significant leap that combined revenue alone can't justify. While Cohere reported $240 million in annual recurring revenue in 2025, Aleph Alpha had previously generated little revenue and significant losses. But investors are betting that teaming up will improve their odds, presumably by merging two mediocre hands into a slightly less mediocre one.
They may not be alone in their thinking. Elon Musk's AI startup xAI has reportedly discussed a three-way partnership with France's Mistral AI and Cursor, which SpaceX recently secured the option to buy. But it remains unclear whether Mistral would be interested in risking its positioning as an alternative to U.S. tech - a positioning that has apparently boosted its revenues. Cohere is hoping to get tailwinds from enterprises looking for alternatives to AI providers that don't meet their privacy and independence requirements. The new entity plans to target highly-regulated industries - including defense, energy, finance, healthcare, manufacturing, and telecommunications - as well as the public sector.
Aleph Alpha also developed specialized language models targeting enterprises and public institutions in Europe, such as the PhariaAI suite. A subsequent pivot and the departure of cofounder and CEO Jonas Andrulis made its strategy and leadership less clear, but its team of 250 people and their expertise could still complement Cohere. "Their focus on small language models, European languages and tokenizers is a really complementary one to our own, which is more of a general focus on large language models," Cohere CEO Aidan Gomez said in a press conference announcing the plans on Friday.
The press conference's lineup was also telling. Rather than Aleph Alpha's co-CEOs, it was co-founder Samuel Weinbach who joined Gomez on stage alongside Schwarz Group's chief digital officer Rolf Schumann. The event also featured German digital minister Karsten Wildberger and his Canadian counterpart Evan Solomon - because nothing says 'we're serious' like a press conference with two government ministers.
Amid growing tensions with the United States, Canada has been increasingly keen to sign bilateral initiatives with a variety of partners, including Germany. With a shared concern for privacy and security, the two countries recently launched a Sovereign Technology Alliance to "strengthen sovereign AI capacity and reduce strategic technology dependencies." The question remains whether European organizations will view an initiative involving Canada as sufficiently sovereign, or whether they will trust that the alliance will remain transatlantic in the long run. According to Gomez, "Cohere will become a Canadian-German company." But ownership could soon become less clear if an IPO is still in the cards - because nothing says 'sovereign' like public shareholders.