Why Cohere is merging with Aleph Alpha

Canadian AI startup Cohere is acquiring Germany-based Aleph Alpha, with Schwarz Group (Lidl's parent company) providing €500 million in structured financing and becoming a strategic backer. The deal values Cohere at approximately $20 billion in its Series E round — a significant jump from its previous $6.8 billion valuation. The combined entity aims to offer a sovereign AI alternative to enterprises in regulated industries (defense, energy, finance, healthcare) and the public sector, positioning itself against U.S.-dominated AI providers. The merger is backed by both the Canadian and German governments, who recently launched a Sovereign Technology Alliance. Aleph Alpha's expertise in small language models, European languages, and tokenizers is seen as complementary to Cohere's large language model focus. Questions remain about whether European organizations will view a Canadian-German entity as sufficiently sovereign, especially if an IPO dilutes ownership.