TSX gainS aS LobLaw moveS on ShopperS

• The Toronto stock market closed higher Monday, led by strength in the consumer staples sector after grocery giant Loblaw Cos. Ltd. announced plans to buy Shoppers Drug Mart Corp. for $12.4 billion in cash and stock.

The S&P/TSX composite index gained 66.17 points to 12,528.35.

Loblaw is offering $33.18 in cash plus about six-tenths of a Loblaw common share for each Shoppers Drug Mart common share. Traders liked the deal, sending Loblaw shares up $2.58 or 5.43% to $50.13. Shoppers shares surged $11.72 or 24.21% to $60.12. Shoppers stockholders also have the option of receiving $61.54 cash but the amount of cash is capped at $6.7 billion and the number of shares is capped at 119.9 million.

In a related move, Loblaw’s majority owner, George Weston Ltd. will subscribe for 10.5 million additional shares of the grocer for $47.55, the closing price for Loblaw shares on Friday. Proceeds from the deal will be used to pay a portion of the Shoppers purchase. George Weston climbed $3.72 to $87.

The Canadian dollar was down 0.18 of a cent to 96.02¢ US.

U.S. indexes were slightly higher amid better than expected earnings from banking giant Citigroup.

The Dow industrials and S&P 500 moved further into record high territory. The Dow edged up 19.96 points to 15,484.26, while the Nasdaq composite index was 7.41 points higher to 3,607.49. The S&P 500 index rose 2.31 points to 1,682.5.

Core retail sales rose just 0.15%, the weakest showing since January, as the report from the Commerce Department showed some weakness at retail stores, particularly department stores.

Citigroup turned in earnings of US$1.25 a share, ex-items, which beat analyst forecasts of $1.17. Its shares were up $1 to $51.81.

The strong showing followed earnings on Friday from JPMorgan Chase and Wells Fargo that also beat forecasts.

There was also relief that a slowdown in China’s economic growth wasn’t as sharp as previously thought.

The world’s second-largest economy grew 7.5% from a year earlier in the second quarter, slowing from the previous quarter’s 7.7%, as weak trade and a clamp down on risky lending at state banks took their toll.

The TSX consumer staples group jumped 7% and also had support from Jean Coutu Group, which was ahead 89¢ to $10.98. There had been speculation earlier this year that grocer Metro Inc. might make a move to buy the drugstore chain.

The utilities group was up 1.44%. Algonquin Power and Utilities rose 14¢ to $7.39.

The financials group was ahead 0.48% while Royal Bank gained 46¢ to $62.26.

The industrials component was ahead 0.37% as Bombardier Inc. advanced 5¢ to $4.96.

The TSX gold sector was ahead about 0.35% while August bullion gained $5.90 to US$1,283.50 an ounce.

Oil erased early losses and the August contract on the Nymex climbed 37¢ to US$106.32 a barrel.

Oil is up about 10% so far this month, jolted higher by unexpectedly sharp drops in U.S. crude and gasoline inventories, which suggest stronger demand. The energy sector was flat.