Metro may merge with Quebec pharmacy chain
VANCOUVER — Another Canadian grocery store and pharmacy chain conglomerate could be on the horizon as Metro Inc. and Jean Coutu Group are “engaged in exclusive discussions” about a merger, sending shares for both companies up.
Metro announced Wednesday morning that the pair are discussing a deal that would see the Montreal-based grocer acquire the Quebec-based pharmaceutical chain.
The proposed acquisition would cost Metro $24.50 per share, which would be paid 75 per cent in cash and the remainder in shares.
This price was established in “the course of negotiations” between the two firms ahead of a non-binding letter of intent dated Aug. 22, Metro said in a statement, adding the Coutu family has indicated it intends to support the proposal.
After a brief trading halt Wednesday morning ahead of the news, both company’s shares moved up as investors reacted positively.
Metro shares rose nearly 10 per cent or $4.00 to $44.09 mid-day, while Jean Coutu advanced more than six per cent or $1.46 to $24.55.
While the acquisition price tag “appears steep,” wrote RBC Dominion Securities Inc. analyst Irene Nattel in a note, the potential combination of the two “would be accretive to shareholders.”
The announcement follows a trend in the industry, said Quebec Finance Minister Carlos Leitao, adding he would let the two companies negotiate.
In 2014, grocery giant Loblaw Companies Ltd. completed a $12.4-billion acquisition of Shoppers Drug Mart.
“There are few players, but those players who are left are much larger and can procure products at a lower price,” he said, stopped on his way into a cabinet meeting.
“For consumers, it’s good news because they’ll be able to get products at a lower price.”
The proposed merger would boost Metro’s store count by several hundred. Jean Coutu operates more than 400 stores in Quebec, Ontario and New Brunswick. Metro has more than 600 food stores in Quebec and Ontario, as well as more than 250 drug stores and pharmacies, according to its website.
Analysts have been anticipating a partnership between the two companies for some time, with the Loblaw-Shoppers merger leading to increased speculation.
— With files from