Metro’s CAN$ 4.5 Billion takeover of Jean Coutu forms Quebec powerhouse

The grocer Metro Inc. (TSX: MRU), Canada’s third largest food and beverage company, confirms the purchase of Jean Coutu (TSX: PJC.A) for approximately CAN$ 4.5 billion.

Already the owner of more than 250 Brunet Pharmacies, Metro wanted to extend its hold to Jean Coutu pharmacies in order to own the largest pharmacy store network in the province of Quebec.

This merge follows a consolidation movement in Canada’s pharmaceutical industry and seemed inevitable. Since 2013, Canadian retailers are facing increasing competition from major American grocers such as Walmart and Costco. Last year, the Jean Coutu group saw its net profit decrease by nearly CAN$ 15M, from CAN$ 213.7M to CAN$ 199.5M.

Under the terms of the transaction, Jean Coutu Group shareholders are being offered a combination of cash and shares worth about CAN$ 24.5 per share. Three-quarters of the payout (CAN$ 3.2 G) will be in cash and one-quarter in Metro shares, making Jean Coutu shareholders owners of 11% of Metro.

The acquisition of Metro arrives while the American group McKesson (NYSE: MCK) has just taken control of the 330 Quebec pharmacies of the Uniprix group last April and echoes the fierce competition that prevails in the sector.

It should, however, generate several tens of millions of dollars of annual synergies within the company, particularly in the distribution sector. We can therefore expect a huge Metro stock appreciation by 2018.

Bibliography

Financial Post. (2017). Grocer Metro to buy pharmacy chain Jean Coutu in $4.5 billion deal. http://business.financialpost.com/news/retail-marketing/metro-inc-to-buy-jean-coutu-group-in-3-60-billion-deal

Les affaires. (2017). Metro confirme l’acquisition de Jean Coutu pour 4,5 milliards. http://affaires.lapresse.ca/economie/commerce-de-detail/201710/02/01-5138543-metro-confirme-lacquisition-de-jean-coutu-pour-45-milliards.php

Reuters. (2017). Metro Inc to buy Jean Coutu Group in $3.60 billion deal. https://www.reuters.com/article/us-jeancoutu-m-a-metroinc/metro-inc-to-buy-jean-coutu-group-in-3-60-billion-deal-idUSKCN1C713H

Bloomberg. (2017). Metro to Sell Assets to Fund $3.6 Billion Coutu Purchase. https://www.bloomberg.com/news/articles/2017-10-02/metro-inc-to-acquire-jean-coutu-group-for-c-4-5-billion

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