Will More Mergers Follow the Loblaw/Shoppers Drug Mart Deal?
Consolidation is alive and well north of the U.S. border. Close on the heels of Sobeys’ recent deal to acquire Safeway’s Canadian business comes the most recent blockbuster, which has Loblaw, Canada’s top grocery chain, agreeing to acquire Shoppers Drug Mart, the nation’s leading drugstore chain.
The recent deals, the analysis goes, were made to give the Canadian chains the power to compete with American rivals Walmart, Costco and Target, all intent on growing share north of their U.S. headquarters.
Interestingly, according to the National Post, Walgreens was interested in acquiring Shoppers and might have made a bid had it not been beaten to the punch by Loblaw. Walgreens has been clear about its plans to grow on a global scale as evidenced by its deal to acquire a 45 percent stake (with more to come) in Alliance Boots last year.
Loblaw’s deal to acquire Shoppers has been widely praised by Canadian retail watchers. Aside from giving the chain increased buying power, the deal also provides immediate access to many urban locations where its American rivals have yet to go. Loblaw was able to gather some of the cash needed to help swing the deal by spinning off its retail assets as a REIT.
"There’s a great space for large one-stop shopping supermarkets or superstores in Canada," Galen Weston, Loblaw’s chairman, told Bloomberg News. "But with the urbanization of the Canadian market, small stores that can offer a really compelling combination of goods and services is a fantastic bolt-on for us."
The plan, similar to what Walgreens is doing in the U.S., is for Loblaw to introduce fresh foods into Shoppers’ stores where there is a local need.
- Loblaw Companies Limited to acquire Shoppers Drug Mart Corporation for $12.4 billion in cash and stock – Loblaw Companies Limited
- Walgreens was scoping out Shoppers before Loblaw bought drugstore chain – Financial Post
- Walgreens on Global Path, Buys Stake in Alliance Boots – RetailWire
- Loblaw Shifts to Inner City in Battle With Wal-Mart – Bloomberg News
- Loblaw to buy Shoppers Drug Mart for $12.4-billion – The Globe and Mail
What do you make of the Loblaw/Shoppers deal? Does this — along with other recent acquisitions, including Sobeys/Safeway and Kroger/Harris Teeter — suggest that we will see an increase in M&A activity in North America over the near term?