Metro Sells C$1.2 Billion of Bonds to Finance Jean Coutu Buy

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  • Canadian grocer sold five-year, 10-year and 30-year bonds
  • It was the Montreal-based company’s largest bond offering
A Metro grocery store stands in Toronto.

Photographer: Brent Lewin/Bloomberg

Canadian grocer Metro Inc. priced C$1.2 billion ($934 million) of bonds in a three-tranche sale to partly finance the C$4.5 billion purchase of pharmacy chain Jean Coutu Group Inc.

Montreal-based Metro sold C$300 million of five-year, C$450 million of 10-year and C$450 million of 30-year senior unsecured notes. The bond offering followed a fixed income roadshow the company held on Nov. 27-28 and a meeting of Jean Coutu shareholders that approved the acquisition on Wednesday.

The purchase of Jean Coutu is part of Metro’s efforts to diversify in an industry under increasing threat from Inc.’s grocery expansion. The bond offering is Metro’s largest on record. The supermarket chain sold C$400 million of three-year floating rate notes in February and a total of C$600 million evenly split between seven-year and 30-year fixed-rate securities three years ago.

The company sold the five-year notes at a spread of 104 basis points over similar-maturity government bonds, the 10-year notes at a 150 basis points spread and 30-year notes at a 205 basis points spread. The spreads on all three tranches were at the tight end of initially proposed guidance, with the two longer tranches increased from minimum targets of C$300 million, according to information from people familiar with the matter, who are not authorized to speak publicly and asked not to be identified.

The company took advantage of the market vying for more supply. Average spreads on Canadian corporate bonds have been tightening since February with the current average level of 100 basis points being the lowest since September 2014, according to data compiled by Bloomberg.

The sale was led by BMO Capital Markets, National Bank Financial Markets and CIBC World Markets with Desjardins Securities, RBC Capital Markets, Scotia Capital, TD Securities and MUFG as co-managers.

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