The chief executive of Shoppers Drug Mart Corp. says he’s confident that a takeover by Loblaw, which shareholders voted to accept on Thursday, will also win the approval from the federal competition agency.
“Our networks are very complementary, as opposed to overlapping, and therefore don’t raise any competitive issues. But clearly we’ll have to submit that to the bureau and make sure we work with them so that they come to the same conclusion,” Shoppers CEO Domenic Pilla said following the vote in Toronto.
Pilla said the pharmacy chain is working with Loblaw, Canada’s largest grocery retailer, to prepare a proposal that will be submitted to the Competition Bureau in the next few weeks.
“Our combined market shares are below what would be typical thresholds for the bureau,” said Pilla. “But they have to do their work and we will collaborate with them very closely and provide them the data they need.”
The deal was approved by 99.9 per cent of the votes cast at the meeting or in advance.
The deal, announced in July, will keep the Shoppers brand name in place and allow it to operate as separate division of Loblaw Companies Ltd.
It may also see some of the stores that Shoppers owns folded into Loblaw’s real estate investment trust, Choice Properties REIT, said Pilla.
“We will work closely with that REIT where it makes sense,” said Pilla, but he noted that Shoppers leases most of its stores, so only a small number of properties would be involved.
The deal was supported by the boards of both companies but required the approval by two-thirds of Shoppers shareholders.
The transaction also required the approval of a majority of Loblaw shareholders as the number of common shares to be issued in the deal exceeds 25 per cent. However, controlling shareholder George Weston Ltd. has already provided written consent in favour of the deal to the Toronto Stock Exchange, which satisfies the approval requirements from Loblaw’s end.
Overall, Loblaw is offering $33.18 in cash plus about six-tenths of a Loblaw share for each Shoppers Drug Mart common share.
The proposal valued Shoppers Drug Mart common shares at $61.54 per share based on Loblaw’s share price before it was announced — a more than a 29 per cent premium to Shoppers’ average trading price prior to the announcement.
Holders of Shoppers stock have the option of receiving $61.54 cash or, alternatively, 1.2941 Loblaw common shares plus one cent cash, subject to caps on the total number of shares and total amount of cash.
The amount of cash is capped at $6.7 billion and the number of shares is capped at 119.9 million, the companies said at the time.
Assuming Shoppers investors opt for the maximum amount of Loblaw equity, they would own about 29 per cent of the combined company.