The Successful Investor Hotline – Friday, July 19, 2013

Article Excerpt

LOBLAW COMPANIES LTD., $48.39, Toronto symbol L, is buying Shoppers Drug Mart Corp. (Toronto symbol SC), which operates over 1,240 drugstores across Canada. Under the deal, Shoppers investors can choose to receive $61.54 in cash or 1.29417 Loblaw common shares and $0.01 cash for each Shoppers share they hold. Loblaw will cap the cash portion, so Shoppers investors will probably wind up with $33.18 in cash plus 0.5965 of a Loblaw common share. Based on today’s share price, the deal is worth $12.5 billion. This is a big purchase for Loblaw, which has a market cap (or the value of all its outstanding shares) of $13.6 billion. Following the takeover, Shoppers shareholders will own 29% of the combined company. Two-thirds of Shoppers investors must approve the transaction at a special meeting in September 2013. If Shoppers accepts an offer from a rival bidder, it will pay Loblaw a $300-million break fee. Assuming Shoppers shareholders and competition regulators approve, Loblaw aims to complete the…