Metro, Coutu agree to merge

Metro Inc. said Monday that it entered into a definitive agreement to acquire the Jean Coutu drug chain in a $4.5 billion deal that would allow the combined companies to better serve a growing demand for healthier choices, value and convenience.

The companies acknowledged they were in the process of merger talks last week.

Under the agreement detailed Monday, Jean Coutu shareholders will receive $24.50 (Canadian) per share of stock to be paid 75% in cash and 25% in Metro stock — becoming approximately 11% owners of Metro.

Jean Coutu operates 419 drugstores in Quebec, Ontario and New Brunswick. Metro will combine its 258 drugstores into the Coutu group, which will operate them as a standalone division of Metro with its own management team led by François J. Coutu.

François Coutu is the son of the company’s namesake and co-founder and chairman Jean Coutu. That company several years ago divested its U.S. pharmacy holdings, which included for a time the Eckerd and Brooks chains.

Eric LaFleche, Metro’s president and CEO, in a conference call Monday lauded Jean Coutu as financially strong and popular brand that was a “strong cultural fit” for Metro.

“Jean Coutu, as you know, is an iconic brand. It's a great business. To me, it's a unique asset with very attractive economics starting with the highest free cash flow conversion of the business. Whether you look at any metric — sales per store, scripts per store, [sales] per square foot — Jean Coutu is always ranked at the top at the heap of North America and I think it's pretty remarkable. The network is modern, well situated and in excellent shape.”

The deal would leave Metro with 1,307 stores overall: 677 pharmacies and 630 food stores. Pharmacy revenues would account for approximately 75% of the company’s pro-forma sales.

Metro said it was expecting annual synergy savings of around $75 million (Canadian).

“Bringing together our two highly respected and longstanding Québec brands represents an exciting milestone in the history of the Jean Coutu Group”, Jean Coutu said in a statement. “I am confident that this combination will ensure the safeguard of our entrepreneurial vision and corporate values as well as the perennial strength of the brand and will enable us to pursue our growth plan.”