Metro Inc. buying A&P Canada chain
Canadian Press
July 19, 2005
MONTREAL -- Reaching boldly into the Ontario market to face Loblaw and Sobeys, Metro Inc. of Montreal is paying $1.7 billion for the A&P Canada supermarket chain.
The Metro grocery chain (TSX: MRU.SV.A) said Tuesday it has struck a deal with The Great Atlantic & Pacific Tea Co. and its subsidiary, A&P Luxembourg, to pay $1.2 billion in cash and $500 million worth of Metro class-A shares.
Metro shares soared more than 13 per cent Tuesday morning, gaining as much as $4.75 to $32.25 on the Toronto Stock Exchange.
''It's a great day for Metro,'' CEO Pierre Lessard said in a morning conference call with analysts. ''A day, as a matter of fact, we've been waiting for the last seven years.''
A&P Canada, which had been seeking a buyer in recent months, operates 236 food stores in Ontario under the A&P, Dominion, Food Basics, The Barn and Ultra Food & Drug banners, with annual sales of $4.4 billion and more than 32,000 employees.
The deal will give Metro a network of 579 food stores - 283 in Ontario - with annual sales of nearly $11 billion, pitting it against major rivals Loblaw (TSX:L) and Sobeys (TSX:SBY).
With its Metro, Metro Plus, Super C, Loeb and Brunet banners, Metro has annual sales of $6.1 billion and more than 33,000 employees.
Metro, the second-biggest grocer in Quebec and eastern Ontario, said in January it could easily finance a billion-dollar acquisition, with only $10.6 million in long-term debt and total assets of $1.65 billion.
Acquiring the No. 2 food retailer in Ontario with a number of stores in the high-growth Toronto area, A&P Canada would enhance Metro's position in Canada's two largest markets, Lessard said Tuesday.
The acquisition will make Metro a ''much larger player'' with a 16 per cent chunk of the Canadian grocery market, he added. Integration of the two companies will be ''straightforward,'' with Metro keeping the A&P head office in Toronto.
Lessard also expects to see ''cost synergies'' of about $60 million resulting from the deal.
''The price may seem high, but we look at it as a very valuable asset,'' he said.
''We are delighted to enter into this historic agreement with Metro and to participate in its future growth and success with a significant investment position,'' Christian Haub, chairman and CEO of A&P's parent company, said in a release.
Metro will issue about 18.1 million shares to the U.S.-based parent firm, based on a price per share of $27.66, giving it about 15.8 per cent of Metro and 14.1 per cent of the total voting rights.
The deal also gives provides A&P the right to designate two representatives to the board of directors at Metro.
Metro said it has secured necessary financing from a syndicate of banks.
The transaction, scheduled to close in August, is expected to add to Metro's earnings per share in 2006 and is subject to customary conditions, including approval by the Toronto Stock Exchange.
© Canadian Press 2005