STORE OWNERS CONCERNED INDEPENDENT GROCERY CHAIN METRO COULD BE FOR SALE

BRIAN DUNN

MONTREAL (FNS) -- An association of about 200 Metro store owners (known in Canada as merchant-owners), citing persistent rumors, has said it thinks Metro (formerly known as Metro-Richelieu) is about to be sold. It said its members believe company management is about to sell Quebec's only independent grocery chain to interests outside the Canadian province. The merchants are threatening to raise funds themselves to buy the chain which has a 35% share of the Quebec grocery market. Metro also has about 50 corporate stores.

Jean Fournier, a merchant-owner and spokesman for the group, said he is afraid Metro will end up like Provigo and IGA (Canada), which were sold two years ago to, respectively, Loblaw Cos. Ltd., Toronto, and Sobeys, Stellarton, Nova Scotia. He said it would be difficult to compete on equal footing if Metro was sold to outside interests.

Although Fournier has no concrete proof Metro is for sale, he points to a resolution introduced at a board meeting late last month to reduce the number of board seats held by merchants from seven to five.

But Bernard Roy, a spokesman for the outside directors, denied Metro was for sale. He said the resolution was introduced to give a more accurate representation to other shareholders of the company as recommended by regulatory authorities. Merchant-owners have 7% of Metro's stock, but 30% of the votes from their ownership of class B shares.

Pierre Lessard, Metro chief executive officer, also denied the company was for sale. He said in a conference call after the board meeting that "for now, we're not in negotiations. But to say Metro will never be bought is impossible, considering we are a public company."

Stephen Jarislowsky, chairman, Jarislowsky Fraser Ltd. here, an investment management firm that owns about 14% of Metro's stock, said, "Everyone knows that Metro has been for sale for the past two years."

But another possibility is for Metro to make a bid for A&P Canada, which has a 13% share of Ontario's $11.5 billion grocery market, according to David Rowan, an analyst with brokerage Dlouhy Merchant here. He believes both Metro and Sobeys are eager to grow their Ontario business and to prevent Loblaw, Canada's largest grocer, from getting any bigger.

Although A&P is struggling worldwide, Rowen said its Canadian operations are doing well.

"My hunch is that [Metro] could go either way," he said.

Despite the uncertainty surrounding the company, Metro continues to perform well. On the same day it introduced the resolution to change its board makeup, the company reported profits rose 120.5% to $16.55 million for the 13-week fourth quarter ended Sept. 30 in comparison with last year's 12-week quarter. Sales for the quarter were up 13.8% to $744 million.

For the 53-week year, Metro earnings rose 27.3% to $62.4 million compared with the previous 52-week year. Sales for the year rose 16.4% to $2.98 billion.

During the current fiscal year, the company said it plans to invest over $65 million in its retail network in Quebec and Ontario, up from $56 million in the fiscal year just ended.