Loblaw's Shoppers takeover approved by Competition Bureau

A Shoppers Drug Mart store is pictured in downtown Ottawa in this February 10, 2011 file photo....

A Shoppers Drug Mart store is pictured in downtown Ottawa in this February 10, 2011 file photo. REUTERS/Chris Wattie/Files

Euan Rocha, Reuters

, Last Updated: 2:44 PM ET

TORONTO - Loblaw Cos Ltd, Canada's largest grocer, said on Friday Canada's competition watchdog has approved its $12.4 billion acquisition of Shoppers Drug Mart Corp, the country's biggest pharmacy chain.

The deal cements Loblaw's No. 1 position in Canada at a time when competition from domestic retailers such as Sobeys and U.S. retailers such as Wal-Mart Stores and Target is heating up.

To win approval from the Competition Bureau, Loblaw has agreed to sell 18 stores and nine pharmacy operations. The company said it does not expect any store closures as a result of these divestitures.

Loblaw said it now expects the deal to close on March 28.

The majority of the stores and pharmacy outlets being sold are in Ontario, but the deal will also result in Loblaw's sale of stores in the Alberta, New Brunswick, Nova Scotia and other provinces.

COMPETITION CONCERNS

In a separate statement, the Competition Bureau said that during its analysis of the deal it identified conduct by Loblaw with respect to its suppliers that could raise concerns under Canada's Competition Act.

The agency said it determined that without restrictions on certain Loblaw programs and agreements, the proposed transaction would likely lead to higher wholesale prices for other retailers and, in some circumstances, higher retail prices for consumers.

The bureau did not specify which supplier agreements it has concerns about, but its approval of the Shoppers takeover contains behavioural restrictions on certain Loblaw programs and agreements on the supply of products for retail sale.

The agency said these restrictions will stay in place for as long as five years from the date the deal closes.

The bureau said it will continue investigating all Loblaw programs, agreements and conduct related to pricing strategies and programs with suppliers that reference rivals' prices.

Loblaw said it will cooperate with the Competition Bureau in its continued review of these practices.

Loblaw is majority owned and controlled by George Weston Ltd , one of the Canada's largest producers of baked goods.


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