The merger of Canada’s largest grocery retailer, Loblaw, and the country’s biggest pharmacy chain, Shoppers Drug Mart, will not reduce competition and customer choice as some fear, Loblaw executive chairman Galen G. Weston assured customers at a press conference in Brampton, Ontario.

“This is a transaction about two complementary businesses,” Weston said. “This is not an overlapping, scaling-up transaction when you really get into the detail.”

In a deal that the two companies say will change the retail landscape in Canada, Loblaw has agreed to buy Shoppers Drug Mart for $12.4 billion.

Toronto-based Loblaw will acquire all outstanding common shares in Shoppers, gaining some 1,200 drug stores in all provinces — many of them small locations in urban markets — in return for cash and Loblaw shares.

The Weston family has agreed to subscribe for additional Loblaw shares but its ownership will be diluted from a stake of about 63 per cent now to 46 per cent after the deal is completed.

Retail analysts said they liked the long-term potential of the deal, which would benefit both Shoppers and Loblaw as they share their winning product lines.

Loblaw shares rose $2.29 to $49.85 at the close of the Toronto Stock Exchange Monday, up 4.84 per cent. Shoppers shares were up 24 per cent at $60, a rise of $11.50.
The deal must still be approved by shareholders and the Competition Bureau.