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Metro in ‘advanced’ talks to buy Jean Coutu chain

Major grocery chain eyes Coutu's retail drugstores

One of Eastern Canada’s major players in the grocery sector is in “advanced discussions” to take up one of the region’s major drugstore chains.

Montreal-based Metro Inc. announced Tuesday it’s in “exclusive” talks with the Jean Coutu Group on the possibilities of a cash-and-stock takeover valued in some reports at around $4.5 billion.

A non-binding letter of intent calls for Metro, which operates over 600 grocery stores and 250 drugstores in Quebec and Ontario, to take up all shares of Coutu for $24.50 a share, of which 75 per cent would be paid in cash and 25 per cent in Metro shares.

The Coutu family, which holds control of the Jean Coutu Group, has “indicated its intention” to support the proposed deal, the companies said.

A deal, if completed, would give Metro a chain of 418 drugstores (as of March) operating under the PJC Jean Coutu, PJC Clinique, PJC Sante and PJC Sante Beaute banners, plus generic drug manufacturer Pro Doc, a Coutu subsidiary.

The proposed deal still depends on negotiation of “definitive agreements” which, if reached, would also be subject to the usual regulatory approvals. The two companies emphasized there’s “no guarantees” a deal will close.

Headquartered in the Montreal suburb of Varennes, the Coutu chain in recent years has pulled back from major U.S. expansion. It merged its U.S. stores into the Rite Aid drugstore chain in 2007 for 32 per cent of the expanded company, but sold off that stake in Rite Aid by July 2013.

Coutu’s franchised drugstores, which operate in Quebec, New Brunswick and Ontario, also include a significant confectionery and grocery component, dealing in beverages, snacks, frozen foods, baby foods and baked goods.

Metro sits with Loblaws and Empire Co. among the three largest Canadian grocery firms, with retail banners including Metro, Metro Plus, Super C and Food Basics and the Brunet, Metro Pharmacy and Drug Basics pharmacy chains.

Metro in 2013 also shed some minority investment outside its own chains, selling off about half its stake in convenience-store giant Alimentation Couche-Tard for $479 million while hanging onto a 21.8 per cent share.

Speculation has since loomed large that Metro would put the proceeds from that sale toward a play for the Coutu chain, and more so since online giant Amazon made its entry into the grocery business by buying U.S.-based Whole Foods Market.

Metro has also taken some steps into the online grocery business, starting last year with pickup and delivery in Montreal and expanding that service to Quebec City earlier this month.

Metro said Sept. 12 the online service “will continue to be deployed in various markets in the province and then be extended to Ontario.” — AGCanada.com Network

 

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