Topic: How To Invest

The Successful Investor Hotline – Friday, September 29, 2017

Article Excerpt

METRO INC., $42.91, Toronto symbol MRU, operates 590 grocery stores and 250 drugstores in Quebec and Ontario. The company confirmed this week that it in discussions to acquire Jean Coutu Group (PJC) Inc. (Toronto symbol PJC.A). That firm operates 419 franchised drug stores in Quebec, New Brunswick and Ontario. It also makes generic pharmaceutical drugs through its Pro Doc subsidiary. An acquisition would cost Metro about $4.5 billion, consisting of 75% in cash and 25% in shares. To put that price in context, Metro’s market cap (the total value of all outstanding shares) is $9.8 billion. The family that controls Jean Coutu has agreed to support a takeover. Metro would have to borrow most of the cash it needs for this acquisition. That would increase its long-term debt to around $4.8 billion, or a high 50% of its market cap. However, Metro could raise $2 billion by selling its 5.7% stake in Alimentation Couche-Tard (Toronto symbol ATD.B). (Couche-Tard, which operates convenience stores in…