This Case is about MERGERS & ACQUISITIONS
PUBLICATION DATE: July 03, 2014 PRODUCT #: W14251-HCB-ENG
In the mid-2013, the executive chairman of the Loblaw Companies Ltd. was contemplating in case it was in his organization’s interest to buy Shoppers Drug Mart.
In December 2012, Loblaw had declared a proposal to develop a property investment trust to which it would initially transfer about 75 per cent of its own significant property holdings, thereby unlocking great value for the investors.
In once, Shoppers’ shares were trading at an attractive valuation. On the other hand, competition was heating up together with the move of big box stores, like Target and WalMart, into Canada as well as the increase of internet buying. Also, new government regulations geared toward reducing the high price of drugs had an immediate effect on pharmaceutical companies.
Beside Loblaw’s shares trading approximately at a six-year high, there was an attractive opportunity to utilize them as currency to make an acquisition whose probable synergies were predicted to be exceeding $300 million per year. Was this a good time to act on what was perceived for several years as an appealing amalgamation alternative? Did it make tactical sense? If so, what cost should Loblaw pay for Shoppers?