Canada's Metro Inc to buy pharmacy chain Jean Coutu Group for C$4.5 bn

Metro Inc, Canada's third biggest food retailer, yesterday struck a deal to buy pharmacy chain Jean Coutu Group for C$4.5 billion ($3.60 billion).

Under the terms of the deal, Jean Coutu shareholders will receive either $24.50 in cash or 0.61006 share of Metro for each Jean Coutu Group share, which represents $18.38 in cash and 0.15251 common share of Metro.

Metro has committed bank facilities of $3.4 billion, fully underwritten by Bank of Montreal, Canadian Imperial Bank of Commerce and National Bank of Canada, to finance the cash portion of the transaction.

The Coutu family and affiliated entities, who hold 93 per cent of the company stock, have agreed to tender their shares to the transaction.

Jean Coutu operates 419 franchised stores in Québec, New Brunswick and Ontario under the banners of PJC Jean Coutu, PJC Clinique, PJC Santé and PJC Santé Beauté, and employs more than 20,000 people.

It also owns Québec-based Pro Doc Ltd, a manufacturer of generic drugs.

With a market cap of C$ 9.7 and annual sales of $12.8 billion, Metro is a leader in food and pharmaceutical distribution in Québec and Ontario.

It operates a network of more than 600 food stores under banners that include Metro, Metro Plus, Super C and Food Basics, as well as over 250 drugstores under the Brunet, Metro Pharmacy and Drug Basics banners.

Post-closing, the merged company will have a network of more than 1,300 stores in Canada, and expects to generate around $16 billion in revenue, and around $75 million in synergies within three years.

''Bringing together our two highly-respected and longstanding Québec brands represents an exciting milestone in the history of the Jean Coutu Group'', said Jean Coutu, chairman of the Jean Coutu Group. ''I am confident that this combination will ensure the safeguard of our entrepreneurial vision and corporate values as well as the perennial strength of the brand and will enable us to pursue our growth plan.''

''We're honored to become the steward of the iconic Jean Coutu Group brand and we intend to build on this exceptional legacy,'' said Eric La Flèche, president and CEO of Metro.

''The Jean Coutu Group's extensive retail network and state-of-the-art distribution center will provide us with increased scale and reach, operational efficiencies and enhanced growth potential,'' he added.