METRO-RICHELIEU MULLS BUY OF PROVIGO'S LOEB

Brian Dunn

BRIAN DUNN MONTREAL (FNS) -- Metro-Richelieu here will decide by spring whether to exercise its option to purchase Provigo Inc.'s Loeb division in Ontario, Pierre Lessard, president and chief executive officer, told SN following the company's annual meeting.

The purchase would represent Metro's first foray into the Ontario market. Loeb has 104 stores, 92 of them in Ontario and the rest in Quebec, with annual sales of about $650 million ($1 billion Canadian). Metro had sales of $2.37 billion for fiscal 1998 ended Sept. 26.

As previously reported in SN, Loblaw Cos., Toronto, granted Metro the right of first refusal for the Loeb stores after Loblaw made a $1.05 billion takeover bid for Provigo Inc., Montreal, last November. The option was part of the conditions that the Caisse de Depot et Placement du Quebec demanded before tendering its 36% Provigo stake to Loblaw.

Some analysts said the Loeb stores are worth between $130 million and $195 million and represent about 8% of the Ontario grocery market. Lessard said a decision to purchase the Loeb stores will be based on due diligence and not on the fact that Loblaw has bought Provigo, and Sobeys Stores, Stellarton, Nova Scotia, has purchased Toronto-based Oshawa Group Ltd.

Despite being left alone on the merger dance floor, Metro continues to outperform its rivals in the Quebec market. In the past five years, its share of the Quebec market has increased from 25% to 35%.

Sales for the first quarter ended Dec. 19 increased 6.8% -- to $586.8 million compared with $549.2 million a year-ago.