In mid-2013, the executive chairman of Loblaw Companies Ltd. was considering whether it was in his firm's best interest to get Shoppers Drug Mart. In December 2012, Loblaw had announced a proposal to develop a property investment trust to which it had initially transfered roughly 75 per cent of its own significant property holdings, hence unlocking value for its investors. In the same time, Shoppers' shares were trading at a historically attractive valuation.
On the other hand, competition was heating up together with the move of big box stores, like Target and WalMart, into the increase of internet buying and also Canada. Furthermore, new government regulations aimed at reducing the high price of drugs had an immediate effect on pharmaceutical companies. Alongside a six-year high Loblaw's shares trading, there was atempting opportunity to exercise them as currency to make an acquisition whose apparent synergies were predicted to be exceeding $300 million per year. Was this a good time to act on what had been perceived for a number of years as an appealing amalgamation alternative? Did it make tactical sense? If so, what price must Loblaw pay for the Shoppers?
PUBLICATION DATE: July 03, 2014 PRODUCT #: W14251-HCB-ENG
This is just an excerpt. This case is about FINANCE & ACCOUNTING
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