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Loblaw Companies Limited Completes Acquisition of Shoppers Drug Mart Corporation

03/28/2014

Acquisition strengthens Loblaw and Shoppers Drug Mart in competitive marketplace. Will deliver more choice, value and convenience to help Canadians Live Life Well

  • Complementary offerings of Canada's #1 food retailer and Canada's #1 pharmacy and beauty retailer
  • Convenient retail locations and unmatched store formats to reach more Canadians where they live and work
  • Canada's leading private label brands

BRAMPTON, ON, March 28, 2014 /CNW/ - Loblaw Companies Limited (TSX: L) ("Loblaw") today announced that it has completed its acquisition of Shoppers Drug Mart Corporation ("Shoppers Drug Mart"), which is now a unique and separate operating division of Loblaw.

"The most successful partnerships are grounded in strengths that complement each other," said Galen G. Weston , Executive Chairman, Loblaw Companies Limited.  "Loblaw and Shoppers Drug Mart are perfect partners. We will drive growth and profitability through our unmatched mix of store formats, products and offerings. This is truly a case of the whole being greater than the sum of its parts."

The acquisition brings together two iconic Canadian brands and harnesses the complementary strengths of the nation's number-one grocery retailer and number-one pharmacy and beauty retailer. It strengthens both companies' competitiveness in an evolving retail landscape, creating new growth opportunities for shareholders. It will give consumers more choice, value and convenience through Canada's largest retail network of unmatched store formats, including Shoppers Drug Mart's important and growing footprint in the small-urban store sector.

The acquisition brings Loblaw and Shoppers Drug Mart within closer reach of more Canadians:

  • 1 billion customer transactions per year
  • More than 2,300 stores (corporate, franchised and Associate-owned)
  • Nearly 1,800 pharmacies
  • 65 million square feet of selling space

Compelling Blueprint to Drive Growth and Profitability

"Consumers are more focused on health and wellness and they are demanding more convenient retail locations," said Vicente Trius , President, Loblaw Companies Limited. "Working together, we will capitalize on these consumer trends and create a compelling new blueprint for future growth and profitability."

Domenic Pilla , who remains President of Shoppers Drug Mart, said: "I am very excited about our partnership with Loblaw, a company which also has a rich retail legacy of providing Canadians superior choice and value. Together, we can learn from each company's expertise to grow and create exciting opportunities for our two businesses and for Shoppers Drug Mart Associate-owners."

On a pro-forma basis in 2013, the combined company generated revenue in excess of $43 billion and EBITDA of approximately $3 billion*. The combination of companies is expected to deliver targeted synergies of approximately $100 million in the first twelve months and approximately $300 million over three years. First-year synergies are expected to come from the cost of goods sold and purchasing efficiencies in goods not for resale. Planned synergies are not dependent on any store closings.

Shareholder Consideration

As holders of Shoppers Drug Mart common shares elected to receive in the aggregate more cash consideration than the maximum aggregate cash consideration of approximately $6.6 billion payable by Loblaw under the arrangement, each holder of Shoppers Drug Mart common shares who elected to receive cash consideration will receive, for each Shoppers Drug Mart common share held, approximately $49.22 in cash (representing $61.54 multiplied by a pro-ration factor of 0.799747) and approximately 0.2592 Loblaw common shares.  Holders of Shoppers Drug Mart common shares who failed to properly make an election or did not make an election prior to the election deadline of 5pm on March 26, 2014, will receive, for each Shoppers Drug Mart common share held, approximately $26.53 in cash and approximately 0.7363 Loblaw common shares. No fractional shares will be issued and Loblaw will pay-out fractional shares in cash.

Loblaw Companies Limited is Canada's food and pharmacy leader, the nation's largest retailer, and the majority unitholder of Choice Properties Real Estate Investment Trust. Loblaw provides Canadians with grocery, pharmacy, health and beauty, apparel, general merchandise, banking, and wireless mobile products and services. With more than 2,300 corporate, franchised and Associate-owned locations, Loblaw, its franchisees, and Associate-owners employ approximately 192,000 full- and part-time employees, making it one of Canada's largest private sector employers.

Loblaw's purpose - Live Life Well - puts first the needs and well-being of Canadians who make one billion transactions annually in the companies' stores. Loblaw is positioned to meet and exceed those needs in many ways: convenient locations; more than 1,050 grocery stores that span the value spectrum from discount to specialty; full-service pharmacies at more than 1,250 Shoppers Drug Mart and Pharmaprix locations and more than 500 Loblaw locations; no-fee banking with PC Financial; affordable Joe Fresh fashion and family apparel; and three of Canada's top consumer brands in Life Brand®, noname® and President's Choice®. Through the PC Plus™ and Shoppers Optimum® loyalty programs, more than one in every three Canadians are rewarded for shopping with the companies.

For more information, visit Loblaw's website at www.loblaw.ca and Loblaw's issuer profile at www.sedar.com.

Forward-Looking Statements
Certain statements in this news release are forward-looking information within the meaning of applicable securities legislation including, but not limited to, statements relating to certain strategic benefits expected to result from the transaction. Forward-looking information is based on a number of assumptions and is subject to a number of risks and uncertainties, many of which are beyond Loblaw's control, that could cause actual results and events to differ materially from those that are disclosed in or implied by such forward-looking information. There can be no assurance that the anticipated strategic benefits and operational, competitive and cost synergies will be realized. Loblaw does not undertake any obligation to update such forward-looking information, whether as a result of new information, future events or otherwise, except as expressly required by applicable law.

*EBITDA is a non-GAAP financial measure, defined as earnings before income taxes, net interest expense and other financing charges and depreciation and amortization.  Loblaw and Shoppers Drug Mart believe this non-GAAP financial measure provides useful information to both management and investors in measuring financial performance.  This measure does not have a standard meaning prescribed by GAAP and therefore may not be comparable to similarly titled measures presented by other publicly traded companies, and should not be construed as an alternative to other financial measures determined in accordance with GAAP.

SOURCE Loblaw Companies Limited

Media Enquiries, contact:
Kevin Groh
Loblaw Companies Limited, Vice President Corporate Affairs and Communication
905-861-2437
kevin.groh@loblaw.ca

Tammy Smitham
Shoppers Drug Mart, Vice President, Communications and Corporate Affairs
416-490-2892
tsmitham@shoppersdrugmart.ca

Investor Enquiries, contact:
Dennis Fong
Loblaw Companies Limited, Investor Relations
905-861-2489
dennis.fong@loblaw.ca