Loblaw files information statement containing new details on Shoppers deal

TORONTO – George Weston Ltd. will likely see its stake Loblaw Companies Ltd. shrink to a minority position with the proposed $12.4-billion takeover of Shoppers Drug Mart Corp., but remain the biggest single shareholder in Canada’s largest supermarket chain.

In a statement issued after markets closed Tuesday, Loblaw (TSX:L) said it may issue a maximum of 119.9 common shares to shareholders of Shoppers (TSX:SC) in the cash and stock deal.

Loblaw will also issue around 10.5 million shares to George Weston Ltd. (TSX:WN).

Combined, these 130.4 million shares represent about 46 per cent of Loblaw’s outstanding common shares, the company said.

“Following completion of the transaction and private placement, Weston will continue to be the largest shareholder of Loblaw with voting ownership of approximately 46 per cent of the outstanding Loblaw common shares,” the company said.

George Weston Ltd. (TSX:WN) currently owns about 63 per cent of Loblaw’s voting shares.

Shoppers, meanwhile, urged its shareholders Tuesday to vote in favour of the deal at a special meeting on Sept. 12 after its board of directors unanimously approved the agreement. The deal requires the approval of at least two-thirds of votes cast at the meeting.

The transaction also requires the approval of a majority of Loblaw shareholders as the number of common shares to be issued in the deal exceeds 25 per cent.

However, George Weston Ltd. has already provided written consent in favour of the deal to the Toronto Stock Exchange, which satisfies the approval requirements from Loblaw’s end.

The two companies announced the plan to combine their operations last month, noting that the acquisition will keep Shoppers’ brand name in place and allow it to operate as separate division of Loblaw.

Overall, Loblaw is offering $33.18 in cash plus about six-tenths of a Loblaw share for each Shoppers Drug Mart common share. The proposal was valued at $61.54 per Shoppers Drug Mart common share based on Loblaw’s share price before it was announced, more than a 29 per cent premium on Shoppers’ average trading price prior to the announcement.

Holders of Shoppers stock have the option of receiving $61.54 cash or, alternatively, 1.2941 Loblaw common shares plus one cent cash, subject to caps on the total number of shares and total amount of cash. The amount of cash is capped at $6.7 billion and the number of shares is capped at 119.9 million, the companies said at the time.

Assuming Shoppers investors opt for the maximum amount of Loblaw equity, they would own about 29 per cent of the combined company.

In a related move, George Weston Ltd. (TSX:WN) said it would subscribe for 10.5 million additional shares of Loblaw — its main subsidiary — valued at $500 million. Weston agreed to pay $47.55, the closing price for Loblaw shares prior to the announcement.

On the Toronto Stock Exchange, Loblaw shares were down 20 cents at $45.52 on Tuesday, while Shoppers stock decline nine cents to $59.15. Shares in George Weston finished the day at $83.01, down 41 cents.