Loblaw plans to issue notes to repay committed loans for acquisitions

By Susanna Moon

Chicago, July 15 - Loblaw Cos. Ltd. said it plans to issue unsecured notes to replace financing for the acquisition of Shoppers Drug Mart Corp., which will cost up to C$6.7 billion.

Loblaw plans to help finance the cash portion of the deal with committed bank facilities underwritten by Merrill Lynch, Pierce, Fenner & Smith Inc., Bank of America, NA, Canada Branch and Bank of America, NA, according to a company press release.

These committed facilities consist of a C$3.5 billion term loan and a C$1.6 billion bridge loan, which Loblaw said it plans to replace primarily by issuing unsecured notes.

The company announced a definitive agreement under to acquire all of the outstanding Shoppers Drug Mart common shares for $33.18 in cash plus 0.5965 Loblaw common shares per each Shoppers Drug Mart common share, on a prorated basis.

Using the Loblaw closing price on July 12, this amounts to $61.54 per Shoppers Drug Mart common share, which represents a 29.4% premium to the 20-day volume-weighted average price of Shoppers Drug Mart common shares as of July 12, the release noted.

The total price will consist of about 53.9% cash and 46.1% Loblaw common shares. Shoppers Drug Mart shareholders may choose whether to receive $61.54 in cash or 1.29417 Loblaw common shares plus $0.01 cash for each Shoppers Drug Mart share held, subject to proration.

The maximum amount of cash to be paid by Loblaw will be about $6.7 billion and the maximum number of Loblaw common shares to be issued will be about 119.9 million, based on the fully diluted number of Shoppers Drug Mart shares outstanding.

The combined company's significant cash flow will allow for rapid debt repayment and will ensure that Loblaw will have ample liquidity and maximum flexibility to support ongoing growth prospects, acquisitions and investments, the company said in the press release.

Loblaw is a Toronto-based Loblaw, a subsidiary of George Weston Ltd., is a distributor of food and general merchandise. Shoppers Drug Mart is a retail drug store chain is based in Toronto.

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