Loblaw Cos. has agreed to sell some stores and pharmacies in gaining approval from Canada's Competition Bureau to complete its acquisition of Shoppers Drug Mart Corp.

Loblaw, Shoppers Drug Mart, acquisition, Competition Bureau, consent agreement, Canada, supermarket, in-store pharmacies, John Pecman, Galen Weston, Canada's largest supermarket operator, Canada's largest drug chain

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Loblaw acquisition of Shoppers Drug Mart approved

March 21st, 2014

BRAMPTON and OTTAWA, Ontario – Loblaw Cos. has agreed to sell some stores and pharmacies in gaining approval from Canada's Competition Bureau to complete its acquisition of Shoppers Drug Mart Corp.

Under a consent agreement announced Friday, Loblaw is required to divest 18 stores — mostly Shoppers Drug Mart locations — and sell nine in-store pharmacies to independent operators.

The Competition Bureau said the consent agreement also includes certain behavioral restrictions on Loblaw programs and agreements with suppliers. Details weren't disclosed.

The $12.4 billion (Canadian) acquisition deal, announced in July, would unite Loblaw, Canada's largest supermarket operator, with Shoppers Drug Mart, Canada's largest drug chain. Combined, the retailer would operate 2,738 stores and 1,824 pharmacies across Canada and have revenue of about $42 billion.

In filing the consent agreement Friday, the Competition Bureau noted that Loblaw's acquisition of Shoppers Drug Mart "would likely result in a substantial lessening or prevention of competition in the retail sale of pharmacy products and drug store-type merchandise in Canada, and in respect of certain Loblaw programs and agreements with suppliers."

"This agreement addresses the most significant negative competitive effects of the merger by ensuring that consumers continue to benefit from competitive prices in the retail sale of drug store and pharmacy products in Canada," John Pecman, commissioner of the Competition Bureau, said in a statement. "The bureau will continue to investigate Loblaw's programs related to its relationship with suppliers to ensure that Canadian consumers benefit from vigorous competition."

The 18 stores to be divested are in Alberta, British Columbia, New Brunswick, Nova Scotia, Ontario and Prince Edward Island and include 14 Shoppers Drug Mart stores and four Loblaw Cos. supermarkets (three No Frills stores and one Save-Easy store). Seven of the in-store pharmacies being sold to independent operators are in Ontario, and two are in Newfoundland.

Loblaw and Shoppers Drug Mart said Friday that they expect to acquisition to close on March 28. The deal was cleared by the Ontario Superior Court of Justice (Commercial List) in mid-September, just days after Shoppers Drug Mart shareholders gave the go-ahead for the acquisition in a special meeting.

"We are pleased the Competition Bureau has concluded its review of this transaction and to have its consent to bring these two great Canadian companies together," stated Galen Weston, executive chairman of Loblaw. "This merger uniquely positions Loblaw to meet the most important consumer trends in the country, including urbanization and health and wellness. In doing so, we will continue to deliver more choice, more value, and more convenience to Canadians." 

Loblaw and Shoppers Drug Mart noted that the transaction brings together complementary offerings of Canada's No. 1 food retailer and No. 1 pharmacy and beauty retailer, leading private-label brands, and "convenient retail locations and unmatched store formats to reach more Canadians where they live and work."

In late September, Loblaw named Mark Butler, executive vice president of its Conventional Division, to lead the integration of Shoppers Drug Mart. In the newly created role, Butler will serve as executive vice president of integration and oversee the planning the integration of the drug chain, as well as lead the team responsible for delivering synergies.

Shoppers Drug Mart's store base encompasses 1,253 Shoppers Drug Mart and Pharmaprix drug stores in each province and two territories, along with 56 medical clinic pharmacies under the Shoppers Simply Pharmacy/Pharmaprix Simplement Santé banners, six Murale luxury beauty outlets and 62 Shoppers Home Health Care stores.

Loblaw's store network includes more than 1,000 corporate and franchised supermarkets across Canada under 22 banners. Loblaw's approximately 500 pharmacies are under such store banners as Loblaws, Loblaw greatfood, Zehrs, Zehrs greatfood, Fortinos, Real Canadian Superstore, No Frills, valu-mart, Atlantic Superstore, Save-Easy, Provigo, Maxi & Cie, Extra Foods, Wholesale Club, Your Independent Grocer, SuperValu and Dominion locations in Newfoundland only.