Cohere and Aleph Alpha merge around sovereign enterprise AI, with Berlin as a second headquarters

Cohere and Aleph Alpha have signed a definitive merger agreement aimed at regulated enterprises and governments that want AI deployed inside their own infrastructure. The company will retain the Cohere name, with headquarters in both Toronto and Berlin; Aleph Alpha’s Heidelberg operation becomes a research centre, and its co-chief Ilhan Scheer becomes chief operating officer.

The merger, first disclosed in April, was valued then at about €17.34bn, or $20bn, and still requires regulatory approval. Its pieces are highly uneven. Cohere reported roughly $240mn in annual recurring revenue last year and develops enterprise-focused models. Aleph Alpha had less than €1mn in 2023 revenue after shifting from frontier-model competition toward integration and orchestration.

Germany’s Schwarz Group is providing €500mn and an unusually important second asset: StackIT, its cloud unit, is building a German data centre intended eventually to hold as many as 100,000 AI chips. That allows the merged business to sell not just “European” branding but a stack—models, integration and computing—designed for customers constrained by data residency, procurement rules or reluctance to depend on US hyperscalers.

The transaction therefore tests a specific European strategy. Rather than trying to beat OpenAI, Anthropic or Google on every general benchmark, Cohere can compete for workloads where on-premises deployment, auditability and sovereignty are part of the product. The main uncertainty is whether that differentiated market becomes large enough to justify a $20bn valuation and the capital required to keep the underlying models competitive.