Loblaw Companies Limited to acquire Shoppers Drug Mart Corporation for $12.4 billion in cash and stock

 Loblaw Companies Limited to acquire Shoppers Drug Mart Corporation for $12.4  billion in cash and stock  Transformational combination brings together two iconic businesses to deliver  more choice, value, and convenience to help Canadians live life well        --  Combines best-in-class pharmacy and food businesses to create a         unique retailer with unmatched capabilities in health &         wellness and nutrition     --  Loblaw gains powerful footprint in the important and growing         small-urban store sector     --  Retaining its name and brand, Shoppers Drug Mart will operate         as a separate division of Loblaw and expand its product         offerings to include Loblaw's private label and convenience         food     --  Combined company generated, on a 2012 pro forma basis, revenues         in excess of $42 billion, EBITDA* of $3 billion, and annual         free cash flow* of $1 billion  BRAMPTON AND TORONTO, ON, July 15, 2013 /CNW/ - Loblaw Companies Limited (TSX:  L) and Shoppers Drug Mart Corporation (TSX: SC) today announced a definitive  agreement under which Loblaw will acquire all of the outstanding Shoppers Drug  Mart common shares for $33.18 in cash plus 0.5965 Loblaw common shares per  each Shoppers Drug Mart common share, on a fully pro rated basis. Using the  Loblaw closing common share price on July 12, 2013, this amounts to $61.54 per  Shoppers Drug Mart common share. This price represents a 29.4% premium to the  20-day VWAP of Shoppers Drug Mart common shares as of July 12, 2013.  This strategic union will enhance the companies' competitive positioning in an  evolving retail landscape, creating new growth opportunities for shareholders,  more and better choices for customers, and greater convenience through  Shoppers Drug Mart's footprint in the important and growing small-urban store  sector.  Creating Compelling New Blueprint for Serving Canadian Customers  "This transformational partnership changes the retail landscape in Canada.  With scale and capability, we will be able to accelerate our momentum and  strengthen our position in the increasingly competitive marketplace," said  Galen G. Weston, Executive Chairman of Loblaw. "This combination creates a  compelling new blueprint for the future, positioning us to capitalize on  important trends in society, from the emphasis on health, wellness and  nutrition, to the imperatives of value and convenience."  "Our customer proposition is at the heart of this combination," said Vicente  Trius, President of Loblaw. "Together, we will be able to significantly  enhance the customer experience by offering even greater assortments, service,  value and convenience while preserving the unique shopping experiences that  make both companies leaders in their respective segments. We are extremely  happy to welcome Shoppers Drug Mart and its talented people, including their  entrepreneurial and trusted Associate-owners, who are well-known for their  patient care and friendly customer service. We intend to preserve the great  strengths of what the company has built by keeping Shoppers Drug Mart as a  separate division of Loblaw, with its own dedicated management team led by  Domenic Pilla.  "This acquisition also will allow us to accelerate our success in driving  growth and profitability at Loblaw organically. Our customer proposition  continues to deliver results, and I am enthusiastic about the prospect of  value creation opportunities on multiple fronts," Mr. Trius concluded.  Domenic Pilla, President and Chief Executive Officer of Shoppers Drug Mart,  said: "We are delighted to partner with Loblaw to leverage our combined  strengths. For our shareholders, this transaction provides significant and  immediate value, as well as the ability to benefit from future upside by  virtue of their continued ownership of shares in the combined company. For  our Associate-owners and employees, who are a valued part of the equation, it  provides the opportunity to pursue rewarding careers as we grow together.  And for our customers, it provides more locations with an enhanced mix of  products and offerings that contribute to the good health of Canadians."  Financial Highlights  On a pro forma basis, the combined company generated in excess of $42 billion  in revenue, $3 billion in EBITDA*, and $1 billion in free cash flow* in 2012.  The transaction is expected to lead to double-digit accretion, adjusted for  intangible amortization, in Loblaw earnings per share in the first year.  The combination is expected to yield annual cost synergies of $300 million by  year three, phased in evenly over the first three years following closing.  These synergies are not dependent on any store closings.  The total consideration will consist of approximately 53.9% cash and 46.1%  Loblaw common shares. Shoppers Drug Mart shareholders will have the ability to  choose whether to receive $61.54 in cash or 1.29417 Loblaw common shares plus  $0.01 cash for each Shoppers Drug Mart share held, subject to pro ration. The  maximum amount of cash to be paid by Loblaw will be approximately $6.7 billion  and the maximum number of Loblaw common shares to be issued will be  approximately 119.9 million, based on the fully diluted number of Shoppers  Drug Mart shares outstanding.  Shoppers Drug Mart shareholders, who will own approximately 29% of the  combined company, stand to benefit from substantial upside over the long-term,  driven by the combined company's strategic position and achievement of full  run-rate synergies.  Loblaw has structured the financing with the intent of maintaining its current  BBB-mid credit rating. Loblaw will finance the cash element of the transaction  with available cash resources and committed bank facilities fully underwritten  by Merrill Lynch, Pierce, Fenner & Smith Inc., Bank of America, N.A., Canada  Branch and Bank of America, N.A. These committed facilities consist of a $3.5  billion term loan and a $1.6 billion bridge loan that Loblaw plans to replace  primarily through issuance of unsecured notes. The combined company's  significant cash flow will allow for rapid debt repayment and will ensure that  Loblaw will have ample liquidity and maximum flexibility to support ongoing  growth prospects, acquisitions and investments.  George Weston Limited, Loblaw's controlling shareholder, has entered into a  voting agreement in support of the transaction. To finance a portion of the  cash consideration, Weston has agreed to subscribe for $500 million of  additional Loblaw common shares at a price of $47.55 per share, Loblaw's  closing share price on July 12, 2013. After giving effect to this investment,  Weston's voting ownership will be approximately 46% of Loblaw's common shares  upon completion of the transaction.  Approvals and Closing Conditions  The transaction will be carried out by way of a court-approved plan of  arrangement and will require the approval of at least 66 2/3% of the votes  cast by the shareholders of Shoppers Drug Mart at a special meeting expected  to take place in September 2013. Under applicable TSX rules, the transaction  also requires the approval of Loblaw shareholders by majority vote, as the  number of Loblaw common shares to be issued in the transaction exceeds 25% of  the total number of outstanding Loblaw common shares. As Weston holds  approximately 63% of Loblaw's common shares, Loblaw expects that the TSX will  accept Weston's agreement to support the transaction as evidence of  shareholder approval and not require Loblaw to hold a shareholder meeting. In  addition to shareholder and court approvals, the transaction is subject to  compliance with the Competition Act and certain other closing conditions  customary in transactions of this nature. Loblaw and Shoppers Drug Mart  anticipate that the transaction will be completed within six to seven months.  Further information regarding the transaction will be included in the  management proxy circular expected to be mailed to Shoppers Drug Mart  shareholders in August. Copies of the arrangement agreement and management  proxy circular will be available on SEDAR at www.sedar.com. The transaction  will provide a capital gains tax-deferred roll-over option for taxable  Canadian holders of Shoppers Drug Mart shares who elect to receive Loblaw  shares. The arrangement agreement provides that Shoppers Drug Mart is subject  to non-solicitation provisions and provides that the Board of Directors of  Shoppers Drug Mart may, under certain circumstances, terminate the agreement  in favour of an unsolicited superior proposal, subject to payment of a  termination fee of $300 million to Loblaw and subject to a right of Loblaw to  match the superior proposal in question.  Both companies' boards of directors have unanimously determined that the  proposed combination is in the best interest of their respective companies.  BofA Merrill Lynch is acting as financial advisor to Loblaw for purposes of  this transaction and delivered an opinion to Loblaw's Board of Directors as to  the fairness, from a financial point of view, of the consideration to be paid  by Loblaw in the transaction. RBC Capital Markets is acting as financial  advisor to Shoppers Drug Mart and has provided an opinion to the board of  directors of Shoppers Drug Mart that the consideration under the transaction  is fair, from a financial point of view, to Shoppers Drug Mart shareholders.  Loblaw retained Torys LLP as its legal counsel and Borden Ladner Gervais LLP  in connection with competition matters. Osler, Hoskin & Harcourt LLP is acting  as legal counsel to Shoppers Drug Mart.  Conference Call Information Loblaw and Shoppers Drug Mart will host a conference call and webcast  accompanied by slides on July 15, 2013 at 8:00 a.m. ET.  To access via tele-conference, please dial (877) 613-8340. The playback will  be made available two hours after the event at (800) 585-8367. To access the  webcast please use this link:  http://event.on24.com/r.htm?e=658120&s=1&k=CE6458FADBA8B6E1FB869CBF5E40B764.  The Conference ID number is 19476058.  To download presentation slides, please use this link:  http://files.newswire.ca/1251/LoblawShpprsFnl.pdf.  About Loblaw Companies Limited Loblaw Companies Limited, a subsidiary of George Weston Limited, is Canada's  largest food retailer and a leading provider of drugstore, general merchandise  and financial products and services. Loblaw is one of the largest private  sector employers in Canada. With more than 1,000 corporate and franchised  stores from coast to coast, Loblaw and its franchisees employ approximately  134,000 full-time and part-time employees. Through its portfolio of store  formats, Loblaw is committed to providing Canadians with a wide, growing and  successful range of products and services to meet the everyday household  demands of Canadian consumers. Loblaw is known for the quality, innovation and  value of its food offering. It offers Canada's strongest control (private)  label program, including the unique President's Choice®, no name® and Joe  Fresh® brands. In addition, the Company makes available to consumers  President's Choice® financial services and offers the PC® points and PC  Plus™ loyalty program. For more information, visit Loblaw's website at  www.loblaw.ca and Loblaw's issuer profile at www.sedar.com.  About Shoppers Drug Mart Corporation Shoppers Drug Mart Corporation is one of the most recognized and trusted names  in Canadian retailing. The Company is the licensor of full-service retail  drug stores operating under the name Shoppers Drug Mart (Pharmaprix in  Québec). With 1,242 Shoppers Drug Mart and Pharmaprix stores operating in  prime locations in each province and two territories, the Company is one of  the most convenient retailers in Canada. The Company also licenses or owns  57 medical clinic pharmacies operating under the name Shoppers Simply Pharmacy  (Pharmaprix Simplement Santé in Québec) and six luxury beauty destinations  operating as Murale. As well, the Company owns and operates 62 Shoppers Home  Health Care stores, making it the largest Canadian retailer of home health  care products and services. In addition to its retail store network, the  Company owns Shoppers Drug Mart Specialty Health Network Inc., a provider of  specialty drug distribution, pharmacy and comprehensive patient support  services; and MediSystem Technologies Inc., a provider of pharmaceutical  products and services to long-term care facilities.  For more information, visit www.shoppersdrugmart.ca.  Forward-Looking Statements This News Release for Loblaw Companies Limited ("Loblaw') and Shoppers Drug  Mart Corporation ("Shoppers Drug Mart ") contains forward-looking statements  about the proposed acquisition by Loblaw of all of the outstanding common  shares of Shoppers Drug Mart . Forward-looking statements are typically  identified by words such as "expect", "anticipate", "believe", "foresee",  "could", "estimate", "goal", "intend", "plan", "seek", "strive", "will", "may"  and "should" and similar expressions. Forward-looking statements reflect  current estimates, beliefs and assumptions, which are based on Loblaw's and  Shoppers Drug Mart 's perception of historical trends, current conditions and  expected future developments, as well as other factors management believes are  appropriate in the circumstances. Loblaw's and Shoppers Drug Mart's estimates,  beliefs and assumptions are inherently subject to significant business,  economic, competitive and other uncertainties and contingencies regarding  future events and as such, are subject to change. Loblaw and Shoppers Drug  Mart can give no assurance that such estimates, beliefs and assumptions will  prove to be correct.  This News Release contains forward-looking statements concerning: the combined  company's financial position, cash flow and growth prospects; certain  strategic benefits, and operational, competitive and cost synergies;  management of the combined company; the timing of the Shoppers Drug Mart's  shareholders meeting and publication of related shareholder materials; the  expected completion date of the proposed transaction; the anticipated tax  treatment of the proposed combination for Shoppers Drug Mart shareholders; and  Loblaw's and Shoppers Drug Mart's anticipated future results. The pro forma  information set forth in this News Release should not be considered to be what  the actual financial position or other results of operations would have  necessarily been had Loblaw and Shoppers Drug Mart operated as a single  combined company as, at, or for the periods stated.  Numerous risks and uncertainties could cause the combined company's actual  results to differ materially from the estimates, beliefs and assumptions  expressed or implied in the forward-looking statements, including, but not  limited to: failure to realize anticipated results, including revenue growth,  anticipated cost savings or operating efficiencies from the combined company's  major initiatives, including those from restructuring; failure to realize  benefits from investments in the combined company's IT systems, including the  combined company's IT systems implementation, or unanticipated results from  these initiatives; the inability of the combined company's IT infrastructure  to support the requirements of the combined company's business; heightened  competition, whether from current competitors or new entrants to the  marketplace, changes in economic conditions including the rate of inflation or  deflation, changes in interest and currency exchange rates and derivative and  commodity prices; public health events including those related to food safety;  failure to achieve desired results in labour negotiations, including the terms  of future collective bargaining agreements, which could lead to work  stoppages; failure to attract and retain key employees and pharmacists or  effectively manage succession planning; risks associated with the performance  of the combined company's associate-owned or franchised store network; the  inability of the combined company to manage inventory to minimize the impact  of obsolete or excess inventory and to control shrink; the impact of potential  environmental liabilities; failure to respond to changes in consumer tastes  and buying patterns; reliance on the performance and retention of third-party  service providers including those associated with the combined company's  supply chain and apparel business; supply and quality control issues with  vendors; other disruptions to the combined company's distribution operations  or supply chain; damage to the reputation of brands promoted by the combined  company, or to the reputation of any supplier or manufacturer of these brands;  product quality and product safety risks which could expose the combined  company to product liability claims and negative publicity; new, or changes to  current, federal and provincial laws, rules and regulations, including  pharmacy reimbursement programs, prescription drug pricing and the  availability of manufacturer allowances, or changes to such laws and  regulations that increase compliance costs; the risk that the combined company  will be unable to implement successful strategies to manage the impact of the  drug system reform initiates implemented or proposed in most provincial  jurisdictions; risks associated with alternative arrangements for sourcing  generic drug products, including intellectual property and product liability  risks; changes in the combined company's income, commodity, other tax and  regulatory liabilities including changes in tax laws, regulations or future  assessments; new, or changes to existing, accounting pronouncements; any  requirement of the combined company to make contributions to its registered  funded defined benefit pension plans, post-employment benefits plan or the  multi-employer pension plans in which it participates in excess of those  currently contemplated; the risk that the combined company would experience a  financial loss if its counterparties fail to meet their obligations in  accordance with the terms and conditions of their contracts with the combined  company; the inability of the combined company to collect on its credit card  receivables; failure of the combined company to lease or obtain suitable store  locations on economically favourable terms; the effect of seasonality  fluctuations; the risk of violations of law, breaches of the combined  company's policies or unethical behavior; property and casualty risks;  injuries at the workplace or health issues; the risk of material adverse  effects arising as a result of litigation; and events or series of events may  cause business interruptions.  Readers are cautioned that the foregoing list of factors is not exhaustive.  Other risks and uncertainties not presently known to Loblaw and Shoppers Drug  Mart or that Loblaw and Shoppers Drug Mart presently believe are not material  could also cause actual results or events to differ materially from those  expressed in its forward-looking statements. Additional information on these  and other factors that could affect the operations or financial results of  Loblaw, Shoppers Drug Mart or the combined company are included in reports  filed by Loblaw and Shoppers Drug Mart with applicable securities regulatory  authorities and may be accessed through the SEDAR website (www.sedar.com).  There can be no assurance that the proposed combination will occur or that the  anticipated strategic benefits and operational, competitive and cost synergies  will be realized. The proposed combination is subject to various regulatory  approvals, including approvals under the Competition Act and by the TSX, and  the fulfillment of certain conditions, and there can be no assurance that any  such approvals will be obtained and/or any such conditions will be met. The  proposed combination could be modified, restructured or terminated.  Readers are cautioned not to place undue reliance on these forward-looking  statements, which reflect Loblaw's and Shoppers Drug Mart's expectations only  as of the date of this News Release. Loblaw and Shoppers Drug Mart disclaim  any obligation to update or revise any forward-looking statements, whether as  a result of new information, future events or otherwise, except as required by  law.  *This News Release uses the following non-GAAP measures: EBITDA and free  cash flow. Loblaw and Shoppers Drug Mart believe these non-GAAP financial  measures provide useful information to both management and investors in  measuring financial performance. These measurers do not have a standard  meaning prescribed by GAAP and therefore they may not be comparable to  similarly titled measurers presented by other publicly traded companies, and  should not be construed as an alternative to other financial measures  determined in accordance with GAAP.  For Loblaw:  Investor Enquiries, contact: Jonathan Ross Director, Investor Relations (905)  861-2153 jonathan.ross@loblaw.ca  Media Enquiries, contact: Julija Hunter Vice President, Public Relations  (416) 509-7804 julija.hunter@loblaw.ca  For Shoppers Drug Mart:  Investor Enquiries, contact: John Caplice Senior Vice President, Treasurer,  Investor Relations & Corporate Affairs (416) 490-2925  jcaplice@shoppersdrugmart.ca  Media Enquiries, contact: Tammy Smitham Vice President Communications &  Corporate Affairs (416) 490-2892 tsmitham@shoppersdrugmart.ca  SOURCE: Loblaw Companies Limited  To view this news release in HTML formatting, please use the following URL:  http://www.newswire.ca/en/releases/archive/July2013/15/c7377.html  CO: Shoppers Drug Mart Corporation ST: Ontario NI: RET FDR MNA CONF   -0- Jul/15/2013 10:00 GMT    
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