Metro sells stake in Couche-Tard to fund Jean Coutu purchase

Canadian supermarket retailer Metro said late Wednesday it has agreed to sell the majority of its stake in convenience-store giant Alimentation Couche-Tard to various parties for about $1.55 billion Canadian ($1.24 billion U.S.) to help fund its previously announced purchase of drugstore operator Jean Coutu Group.

The stock sale will include three separate transactions, including approximately 11.4 million shares to subsidiaries of Caisse de dépôt et placements du Québec for CA$650 million; another 11.4 million shares via a bloc trade deal to dealers, led by National Bank Financial Inc. and BMO Capital Markets, for another CA$650 million; and about 4.4 million shares for cancellation to Couche-Tard for CA$250 million.

In addition to helping fund the CA$4.5 billion Jean Coutu purchase, Metro, which is based in Montreal, said the proceeds from the sale would be used to pay down debt.

Metro will retain about 5.1 Class A shares in CoucheTard, or about 3.9% of Class A shares (about 0.9% of total shares).

Couche-Tard, based in Laval, Quebec, is the largest c-store operator in Canada and one of the largest in the world. In the U.S., it operates primarily under the Circle K and Kangaroo Express banners.

The company is seen as a potential buyer for Kroger’s c-store operations, which that company said on Tuesday it would consider selling off as it focuses on investments in its core supermarket network.

Warehouse investments

Separately, Metro on Wednesday said it would invest CA$400 million over the next six years to modernize its distribution network in Ontario by building a new fresh distribution facility and a new frozen distribution facility, both of which will include more automation.

The changes will result in the elimination of about 180 full-time and 100 part-time positions starting in 2021, the company said.

Metro currently operates six DCs in Ontario that employ about 1,500 workers.

"The new distribution centers will provide improved product assortment and selection accuracy as well as more flexibility which will allow us to improve service to our store network and customers," said Carmen Fortino, executive VP and Metro Ontario division head.

The upgrades will also support Metro’s plans for continued expansion in Ontario, the company said.