By Peter Evans 

European grocery chains Royal Ahold NV and Belgium's Delhaize Group confirmed Tuesday they are in talks about a near-$26 billion merger that could create one of the largest supermarket operators in the U.S.

Despite being based in Europe, both companies generate about 60% of their sales in the U.S., primarily along the East Coast. Netherlands-based Ahold operates the Stop & Shop and Giant chains, as well as online grocery store Peapod, while Belgium's Delhaize owns the Food Lion and Hannaford banners.

No financial details of the potential merger were disclosed and the companies said the talks may not result in any deal. Based on closing share prices Friday--before renewed speculation about a deal surfaced--the new company would be valued at EUR22.91 billion ($25.79 billion.)

The potential deal comes at a time of upheaval in the retail industry on both sides of the Atlantic. Consumers used to shopping in discount stores during the recession haven't switched back to more traditional retailers, while many are choosing to buy groceries online.

The impact of the shift in habits has been substantial. In the U.S., companies including Kroger Co. and Costco Wholesale Corp.--as well as a surge in shopping at dollar stores--have eaten away at the market share of Wal-Mart Stores Inc., the world's biggest retailer. In Europe, similar forces have battered Tesco PLC, the U.K. market leader that last month reported a full-year loss of GBP6.38 billion ($9.95 billion), by far the steepest in its history.

Ahold and Delhaize, like midmarket retailers world-wide, find themselves caught in a squeeze between discounters like Costco and high-end grocers like Whole Foods Market Inc. The two European companies have been thinking about a combination for years, reportedly having held talks in 2006, as they seek greater scale and cost savings to take on the competition.

Analysts said a combination of Ahold and Delhaize could help resist the discounter threat in the U.S. and Europe, while also creating cost savings and a much wider spread of stores on both continents.

In the U.S., the new company would form a formidable presence on the East Coast, with a combined total of 2,034 stores, according to analysts at Exane BNP Paribas. That would include 129 stores in New York and nearly 500 in North Carolina.

"The big obvious benefit, especially in the U.S., is the scale advantage the combined group will have in terms of purchasing power," said Pradeep Pratti, an analyst at Citi.

Still, large-scale retail mergers are rare, and some analysts were skeptical about the benefits of a tie-up. "Cost savings in retail acquisitions or mergers are highest when there is a large overlap and local scale economics improve," analysts at Bernstein said in a note on Monday. "In this case there is very limited local overlap.... We think this is a bad deal for Ahold investors."

David Payne, an analyst at Nomura, agreed that there are relatively few synergies between the two companies' U.S. operations. "We do believe there is at least shareholder appetite for the simplification that combination (and later, perhaps, separation of U.S. and European operations into two new companies) would bring," he said in a research note.

A combination would create one of the largest food retailers in Europe and the U.S. with around EUR54 billion in annual sales. Based on recent estimates by Morgan Stanley, a combination would have a market share of around 4.2% in the U.S., making it the country's fifth-largest food retailer.

Both stocks soared on deal speculation Monday, with Delhaize up 14.5% and Ahold up 5.5%. In morning trading Tuesday, Delhaize was up 1.1% to EUR83.84 and Ahold was up 1.8% to EUR18.51.

Maarten van Tartwijk contributed to this article.

Write to Peter Evans at peter.evans@wsj.com

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