The Canadian AI firm Cohere is acquiring Germany’s Aleph Alpha with backing from Schwarz Group, the parent corporation of Lidl supermarkets. With governmental support, these companies aim to provide a sovereign alternative for businesses in an AI environment largely influenced by American firms.

Both Aleph Alpha and Cohere are known for their development of large language models, having gained recognition in their local markets, yet they still trail behind global leaders like OpenAI. Despite some common ground, this collaboration is not between equals. Cohere, which was last valued at $6.8 billion, will head the new organization that will merge Aleph Alpha, pending regulatory and shareholder approvals.

Schwarz Group, a primary investor in Aleph Alpha, has already expressed full support for the acquisition. The retail powerhouse will become a strategic partner of the new organization with an investment of €500 million in structured financing (around $600 million) — and anticipates leveraging STACKIT, the sovereign cloud solution from its IT arm, Schwarz Digits.

In conjunction with its financial contribution, Schwarz Group is also serving as Cohere’s lead investor in the Series E funding round, having set the valuation at approximately $20 billion. According to the German news outlet Handelsblatt, the term sheet puts this valuation firmly in place.

This would represent a notable advancement that can’t solely be justified by combined revenue numbers. While Cohere recorded $240 million in annual recurring revenue in 2025, Aleph Alpha had previously seen minimal revenue and considerable losses. Nonetheless, investors are optimistic that this partnership will enhance their prospects.

They may share this belief with others. Elon Musk’s AI venture xAI has reportedly contemplated a three-way partnership with France’s Mistral AI and Cursor, which SpaceX has recently shown interest in acquiring. However, it remains uncertain whether the French company would risk jeopardizing its position as an alternative to U.S. technology, which has been beneficial for its revenue streams.

Cohere is similarly looking to capitalize on enterprises seeking alternatives to AI service providers that may not fulfill their standards for privacy and autonomy. The new establishment plans to focus on highly-regulated sectors such as defense, energy, finance, healthcare, manufacturing, telecommunications, and the public sector.

Aleph Alpha has also created specialized language models oriented toward businesses and public entities in Europe, like the PhariaAI suite. A later strategic shift and the exit of co-founder and CEO Jonas Andrulis has left its strategy and leadership somewhat ambiguous, yet its team of 250 skilled professionals could still enhance Cohere’s capabilities.

“Their emphasis on small language models, European languages, and tokenizers is very complementary to our approach, which focuses more broadly on large language models,” stated Cohere CEO Aidan Gomez during a press conference announcing the partnership on Friday.

The event’s guest list was also noteworthy. Instead of Aleph Alpha’s co-CEOs, co-founder Samuel Weinbach took the stage with Gomez alongside Schwarz Group’s chief digital officer Rolf Schumann. The gathering also included German digital minister Karsten Wildberger and his Canadian counterpart Evan Solomon.

As tensions rise with the United States, Canada is increasingly eager to form bilateral partnerships with various nations, including Germany. Sharing concerns over privacy and security, the two nations recently established a Sovereign Technology Alliance aimed at “enhancing sovereign AI capabilities and diminishing strategic technological dependencies.”

The lingering question is whether European organizations will perceive a Canadian initiative as sufficiently sovereign, or if they will trust that the alliance will remain transatlantic in the long term. According to Gomez, “Cohere will become a Canadian-German company.” Nevertheless, ownership may soon become less defined if a public offering is on the horizon.