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Metro, Jean Coutu strike deal to merge

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Combined food and drug retailer will have over 1,300 stores

MONTREAL — Just days after confirming talks about a potential deal, Metro Inc. and the Jean Coutu Group have agreed to merge.

The companies said Monday that Metro plans to acquire Jean Coutu Group for $24.50 per share in cash and stock in a total deal valued at $4.5 billion ($3.6 billion U.S.). Under the agreement, Jean Coutu shareholders will receive an aggregate consideration of 75% in cash and 25% in Metro common shares, as the companies had said in confirming negotiations for a Metro-Jean Coutu Group merger deal last week.

“We’re honored to become the steward of the iconic Jean Coutu Group brand, and we intend to build on this exceptional legacy,” Eric La Flèche, president and chief executive officer of Metro, said in a statement. “This transaction is attractive and compelling from a financial and commercial perspective. It is a unique opportunity to bring together each company’s expertise to better serve the growing consumer demand for healthier choices, value and convenience.

“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,” La Flèche noted. “We look forward to having Jean Coutu Group shareholders become important Metro shareholders.”

Plans call for Metro’s pharmacy distribution and franchising activities, including McMahon Distributeur Pharmaceutique Inc., to be combined with those of the Jean Coutu Group. Metro said Jean Coutu Group will operate as a stand-alone division with its own management team, led by François Coutu, president and CEO of the Jean Coutu Group.

“The strategic and commercial fit between the two companies and their retail networks represents an opportunity for continued growth,” Coutu stated. “It will consolidate our position as the leading destination for professional services, health, beauty and wellness with a network comprised of more than 675 independent stores.

“This transaction also represents an opportunity for our shareholders to realize significant and immediate value while providing them the opportunity to participate in the future upside through continued ownership in the combined entity,” he added.

Together, Metro and Jean Coutu will form a $16 billion food and drug retailer with 1,307 stores in Quebec, Ontario and News Brunswick, the companies said. That includes Metro’s 630 food stores in Quebec (367 locations) and Ontario-New Brunswick (263 ), Jean Coutu’s 419 drug stores in Quebec (382) and Ontario-New Brunswick (37), and Metro’s 258 drug stores in Quebec (184) — including the Brunet pharmacy chain — and Ontario-News Brunswick (74).

“Bringing together our two highly-respected and longstanding Quebec brands represents an exciting milestone in the history of the Jean Coutu Group,” commented 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.”

The Jean Coutu Group board of directors has unanimously approved the merger agreement. Jean Coutu shareholders are slated to vote on the deal in a special meeting to be held next month. The Coutu family and affiliated entities, which hold Jean Coutu Group shares representing 93% of the voting rights for all of the company’s shares, have agreed to vote all of their shares in favor of the transaction at the meeting, the company said.

Pending regulatory approvals and other customary closing conditions, the transaction is expected to close in the first half of 2018, according to Metro and Jean Coutu Group. A termination fee of $135 million is payable to Metro in certain circumstances, the companies said.


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