Two of the biggest retailer’s names in Canada have joined forces in a $4.5-billion. Grocery chain Metro Inc. has made a formal offer to acquire pharmacy group after exclusive negotiations between the two retailers. The combined company will have about $16 billion in annual revenues and $500 million in free cash flow.
Shareholders of Jean Coutu are being offered a combination of cash and shares worth about $24.50 per share. Three-quarters of the payout or $3.2 billion will be in cash and 25% in Metro shares, making Jean Coutu shareholders 11% owners of Metro.
Metro has more than 850 food and pharmacy stores in Quebec and Ontario, while Jean Coutu has 419 pharmacies in Quebec, Ontario and New Brunswick. Metro operates grocery stores under several banners, including Metro, Metro Plus, Super C and Food Basics, as well as more than 250 drugstores under the Brunet, Metro Pharmacy and Drug Basics banners.
Jean Coutu will take over Metro’s pharmacy operations over the next three years but will continue to operate as a separate division, headed by François Coutu, son of the company founder.
The two companies have had an eye on consolidation in the retail sector, including Loblaw’s purchase of Shoppers Drug Mart in 2013, as well as the arrival of new competitors, such as Amazon and Walmart.
“This was the best opportunity for Metro to gain scale in Canada,” according to Metro chief executive officer Eric La Flèche.
It has made several takeovers in the past 12 years, including A&P Canada and ethnic food retailer Marché Adonis as well as a share of Alimentation Couche-Tard
La Flèche said Metro saw Jean Coutu as an “iconic brand,” known and trusted in Quebec, with state-of-the-art prescription technology, a plus with Canada’s aging population. “It’s a unique asset and clearly worth the price we paid,” he said.
The deal requires regulatory approvals and support from two-thirds of the votes cast by Jean Coutu Group shareholders in November.
