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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