August 28, 2013 / 5:30 PM / in 5 years

Shoppers CEO says deal with Loblaw to get September competition review

TORONTO (Reuters) - Loblaw Co Ltd (L.TO), which last month announced a C$12.4 billion ($11.9 billion) deal to buy Shoppers Drug Mart Corp SC.TO, will submit its application to the competition bureau after investors vote on the deal next month, Shoppers’ chief executive said on Wednesday.

Shareholders of pharmacy chain Shoppers are expected to approve the acquisition, Canada’s biggest deal so far this year, when they vote at a special meeting on September 12, CEO Domenic Pilla told Reuters.

“We will submit an application to the competition bureau shortly after the shareholder meeting and then work with the bureau to get approval as quickly as possible,” he said. “We expect the shareholders to approve the transaction.”

Loblaw, Canada’s largest food retailer, made the deal with Shoppers, Canada’s biggest pharmacy chain, amid intensifying competition from the likes of Wal-Mart Stores Inc (WMT.N), Target Corp (TGT.N) and domestic competitors.

Canadian rival Empire Co Ltd (EMPa.TO), which operates the Sobeys grocery chain, cemented its position as the country’s No. 2 grocery when it moved to acquire Safeway Inc’s SWY.N Canadian assets for $5.7 billion in June.

The deal will give Loblaw immediate access to Shoppers’ lucrative network of stores in dense urban neighborhoods.

The pharmacy chain, which is facing its own challenges as pricing controls for generic drugs tighten in Canada, has expanded in other areas, particularly in the beauty category, where Pilla says it is now the market leader in Canada.

Pilla, who was attending an opening in Toronto of the chain’s new beauty boutique format, said further details on how the companies would merge and brand their offerings would come after Canada’s Competition Bureau approves the deal.

Executives at both companies said they do not foresee having to sell substantial assets to meet regulatory requirements, and said the transaction would not significantly change market share in their food and pharmacy businesses.

But Pilla said customers should expect fresh foods, a greater selection of frozen foods and prepared meals, more exposure to meats and diary, and bakery goods.

“We definitely envisage an enhanced food offering to our Shoppers Drug Mart stores, absolutely. I wouldn’t characterize them as a grocery store, but I would characterize them as a total grocery shop in a convenience format,” he said.

The companies have said they expect the deal to close by the end of the first quarter of 2014.

Editing by Leslie Adler

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