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Shoppers Drug Mart issues alert on mini-tender offer

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TORONTO — Shoppers Drug Mart Corp. this week urged its stockholders to reject a mini-tender offer for just under 1% of the company’s outstanding common shares.

The Canadian drug store chain said Monday that it has received a copy of an unsolicited, below-market mini-tender offer by TRC Capital Corp. to buy up to 2 million shares of Shoppers Drug Mart (SDM), accounting for roughly 0.92% of the retailer’s outstanding common shares.

SDM noted that the offer price of $42.10 per share represents a 4.82% discount to the $44.23 closing price of the chain’s shares as of December 24, the last trading day before the date of the offer, and a 7.29% discount to the $45.41 closing price of its shares on December 31.

"Shoppers Drug Mart Corp. recommends that shareholders do not tender their shares in response to TRC’s below-market mini-tender offer," the drug chain said in a press release on the offer.

"Shareholders who are considering tendering their shares to TRC’s mini-tender offer are strongly urged to exercise caution with respect to TRC’s mini-tender offer," the retailer added.

Mini-tender offers are generally frowned upon by the investment community because they typically are below a stock’s current market value and involve less than 5% of a company’s outstanding shares and, therefore, aren’t subject to the same regulatory requirements as tender offers.

Both the U.S. Securities and Exchange Commission (SEC) and the Canadian Securities Administrators have issued investor advisories about mini-tender offers.

"Mini-tender offers — tender offers for less than 5% of a company’s stock – have been increasingly used to catch investors off guard," the SEC said in its alert on mini-tenders. "Many investors who hear about mini-tender offers surrender their securities without investigating the offer, assuming that the price offered includes the premium usually present in larger, traditional tender offers. But they later learn that they cannot withdraw from the offer and may end up selling their securities at below-market prices."

TRC has made numerous below-market mini-tender offers for shares of other companies, including such firms as Cardinal Health spin-off CareFusion, PepsiCo, Valero Energy Corp., Kroger Co., Canadian Tire Corp. and Hess Corp.

SDM said shareholders who have already tendered can withdraw their shares by providing the written notice described in the TRC offering documents before the expiration of the offer on January 28. 

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