Metro, Jean Coutu enter $4.5B deal to combine grocery, pharmacy chains

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Two of the largest retail names in Quebec have joined forces in a $4.5-billion contract they say will make them a leader in food, pharmacy, condition and beauty.

Grocery chain Metro Inc. has made a formal offer to repudiate a note over Jean Coutu pharmacy group after exclusive negotiations between the two retailers.

Shareholders of Jean Coutu are being proffered a combination of cash and shares worth about $24.50 per share. Three-quarters of the payout or $3.2 billion desire be in cash and 25 per cent in Metro shares, making Jean Coutu shareholders 11 per cent holders of Metro.

Metro has more than 850 food and pharmacy holds in Quebec and Ontario, while Jean Coutu has 419 pharmacies in Quebec, Ontario and New Brunswick.

Together, listing their franchise operations, they employ 86,000 people and are the largest secret sector employer in Quebec, according to Metro chief executive manager Eric La Flèche.

Jean Coutu Group 20170711

Jean Coutu Group CEO François Coutu last wishes as continue to run the pharmacy group. (Graham Hughes/Canadian Press)

Jean Coutu determination take over Metro’s pharmacy operations over the next three years, but liking continue to operate as a separate division, headed by François Coutu, son of the actors founder.

In a conference call with analysts, La Flèche said the coalescence is an opportunity to capitalize on consumer trends focusing on health and wellness.

«Consumers of all ages are centred on health and what they eat,» he said.

He forecasts $75 million in synergies between the two manoeuvrings over the next three years, including shared warehousing, an swell online presence and eventually cross-selling of products.

Grocery industry championship

The two companies have had an eye on consolidation in the retail sector, including Loblaw’s securing of Shoppers Drug Mart in 2013, as well as the arrival of new competitors, such as Amazon and Walmart.

«This was the to the fullest extent opportunity for Metro to gain scale in Canada,» La Flèche said.

Metro runs grocery stores under several banners, including Metro, Metro Plus, Wonderful C and Food Basics, as well as more than 250 drugstores at the mercy of the Brunet, Metro Pharmacy and Drug Basics banners.

It has made discrete takeovers in the past 12 years, including A&P Canada and ethnic eatables retailer Marché Adonis as well as a share of Alimentation Couche-Tard

La Flèche phrased Metro saw Jean Coutu as an «iconic brand,» known and trusted in Quebec, with state-of-the-art medicament technology, a plus with Canada’s aging population.

«It’s a unique asset and distinctly worth the price we paid,» he said.

$16B in annual revenues

The transaction needs regulatory approvals and support from two-thirds of the votes cast by Jean Coutu Gathering shareholders at a special meeting to be held in November.

The companies announced endure week that they were in «exclusive discussions» toward a buy to create a grocery-pharmacy group with more than 1,300 put bies — in Quebec, Ontario and New Brunswick.

The combined company will have nearly $16 billion in annual revenues and $500 million in free exchange flow.

Metro shares fell 1.5 per cent in trading, perpetual at $42.25 at midday. Jean Coutu shares rose 1.5 per cent to $24.58 a ration.

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