Grocery giant Loblaw to buy Shoppers Drug for $12.4 billion

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No customer impact, company says

TRURO – Shoppers Drug Mart customers will not be affected by the announced sale of the pharmacy chain to Loblaws, a company spokesperson says.

Loblaws to buy Shoppers

“The most important part for people is there is no impact to the store and store employees,” said Tammy Smitham, in a telephone interview from Shoppers head office in Ontario.

“Essentially it’s business as usual for Shoppers Drug Mart and we expect no impact to our customers,” she said. “We’re hoping to deliver the same level of service they’ve come to expect from us.”

That includes the fact there are no planned changes to the Optimum card program.

Loblaw Companies Ltd., which owns the Atlantic Superstore, announced Monday that it is involved in “a friendly deal to purchase Shoppers Drug Mart Corp., for $12.4 billion in cash and stock, combining Canada’s largest grocery and pharmacy chains.

Domenic Pilla, president and CEO of Shoppers Drug Mart, said the deal provides “significant and immediate value” for Shoppers shareholders who will receive up to $6.7 billion of cash and 119.9 million Loblaw shares.

“For our Associate-owners and employees, who are a valued part of the equation, it provides the opportunity to pursue rewarding careers as we grow together. And for our customers, it provides more locations with an enhanced mix of products and offerings that contribute to the good health of Canadians.”

Using the Friday closing price, the offer is worth $61.54 per Shoppers Drug Mart common share — about 29 per cent above the recent average trading price for the Shoppers stock — with about 54 per cent of the price paid in cash.

Under the terms of the agreement, which is still subject to approvals, Shoppers will keep its brand name and operate as a separate division of Loblaw.

“This transformational partnership changes the retail landscape in Canada,” said Galen G. Weston, executive chairman of Loblaw, in a joint statement issued Monday.

“With scale and capability, we will be able to accelerate our momentum and strengthen our position in the increasingly competitive marketplace,” he said.

If the combination had been completed last year, the business would have had about $42 billion of revenue and $1 billion of free cash flow last year. The companies expect to produce $300 million in cost savings after three years.

Canadian retailers have faced increasing competition from large U.S. chains, such as Target, which began to roll out its stores across the country earlier this year. It joins Walmart and Costco and as well as domestic retailers such as Sobeys that offer a combination of merchandise, pharmacy products and groceries.

Loblaw is offering $33.18 in cash plus about six-tenths of a Loblaw common share for each Shoppers Drug Mart common share.

In a related move, George Weston Ltd., will subscribe for 10.5 million additional shares of Loblaw — its main subsidiary — valued at $500 million. Weston will pay $47.55, the closing price for Loblaw shares on Friday.

Proceeds from the Weston stock purchase will be used to pay a portion of the Shoppers purchase.

George Weston will control about 46 per cent of the Loblaw voting rights after the acquisition.

With files from Canadian Press.

hsullivan@trurodaily.com

Twitter: @tdnharry

 

 

 

Organizations: Loblaws, Shoppers Drug Mart, George Weston Ltd. Target Walmart Costco Sobeys TSX

Geographic location: Canada, U.S.

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  • Roger B
    July 15, 2013 - 19:44

    "increasingly competitive marketplace"?? When one of the "Big Boys" buys up another "Big Boy" you end up with less competition.