Loblaw will buy Shoppers Drug Mart for $12.4 billion in cash and stock. Loblaw is Canada’s largest grocery retailer, while Shoppers is Canada’s largest pharmacy chain.Shoppers Drug Mart will keep its brand name and operate as a separate division of Loblaw. Store closings are not expected and the continued use of ‘associate owners’ (franchises, essentially) at Shoppers Drug Mart will continue.
Loblaw anticipate a ‘cross marketing’ of each company’s products, including Loblaw President Choice and Blue Menu brands and Shopper’s Life brands. Cross marketing would extend to their loyalty points programs as well.
The deal will require approval by at least 2/3 of the votes case by Shoppers Drug Mart shareholders at a special meeting expected to take place in September. A majority of Loblaw shareholders must also approve the deal because of the number of shares being issued.
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. The companies expect to produce $300 million in cost savings after three years, without store closures.
Last month we reported that Canada Safeway was bought by Sobeys for $5.8 billion. 2013 is proving to be a year of significant retail mergers and purchases by some of Canada’s largest companies. [Loblaw website]