Loblaw has announced a deal to acquire Shoppers Drug Mart for C$12.4bn, in a deal that will lead to the teaming up of Canada?s largest grocery and drugstore chains. The deal comes just weeks after Sobey?s, the country?s No.2 grocer, acquired Safeway Inc?s local assets for $5.7bn.
Such deals are accelerating as Walmart and Target continue to expand across the country. The Loblaw-SDM deal will create a retail entity with more than C$42bn in revenue, and one that operates more than 2,400 outlets across the country. Under the deal, Shoppers Drug Mart shareholders will own about 29% of the combined company. The drugstore chain will also retain its name and brand and will operate as a separate division of Loblaw.
The companies said they do not plan to shut down any of the existing SDM or Loblaw outlets, nor do they foresee any layoffs. They added that they will cross-market their loyalty programmes, and will offer their respective own label ranges in each others stores, eventually creating a combined own label brand.
Loblaw already operates pharmacies in some of its stores, but it said the deal will significantly boost its position in the market (currently 5% of Canada?s pharmacy market). The deal also gives the grocer access to a network of smaller stores in urban neighbourhoods, allowing it to reach new customers.
The deal is subject to regulatory approval, although both firms said they expect to complete the same in six to seven months. Both firms said they do not expect to be asked to sell substantial assets, insisting that that the deal would not significantly change market share in their food and pharmacy businesses.
The acquisition is expected to generate annual cost savings of C$300m by the third year.
NamNews - Tuesday 16th July 2013
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