Industry News / Retailer News / Channels / News / Drug / Grocery

Loblaw To Buy Shoppers Drug Mart

Loblaw announced Monday morning that it would buy Shoppers Drug Mart for $12.4 billion in cash and stock, uniting the largest grocery chain in Canada with the largest drugstore chain.

The companies said that Shoppers Drug Mart would operate as a separate division of Loblaw, and would expand its product offerings to include Loblaw’s private label and convenience food items.

“This transformational partnership changes the retail landscape in Canada,” Loblaw CEO Galen Weston said in a news release. “With scale and capability, we will be able to accelerate our momentum and strengthen our position in the increasingly competitive marketplace.

“This combination creates a compelling new blueprint for the future, positioning us to capitalize on important trends in society, from the emphasis on health, wellness and nutrition, to the imperatives of value and convenience.”

The companies said they expected cost synergies of $300 million by the third year of their combination, without store closings to get those. The combined company is expected to generate more than $42 billion annually in revenue, $3 billion in earnings, and $1 billion in free cash flow in 2012.

“We are delighted to partner with Loblaw to leverage our combined strengths,” Shoppers Drug Mart CEO Domenic Pilla said in the release. “For our shareholders, this transaction provides significant and immediate value, as well as the ability to benefit from future upside by virtue of their continued ownership of shares in the combined company.  For our associate-owners and employees, who are a valued part of the equation, it provides the opportunity to pursue rewarding careers as we grow together.  And for our customers, it provides more locations with an enhanced mix of products and offerings that contribute to the good health of Canadians.”

The boards of directors of both companies have approved the deal. The deal will require two-thirds of Shoppers Drug Mart’s shareholders to approve it in a special September meeting. The firm’s largest shareholder, George Weston Limited, said it would back the move.

“Our customer proposition is at the heart of this combination," Loblaw President Vicente Trius said in the release. “Together, we will be able to significantly enhance the customer experience by offering even greater assortments, service, value and convenience while preserving the unique shopping experiences that make both companies leaders in their respective segments.”

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