Loblaw Companies Ltd. has been given the green light from the Competition Bureau for its acquisition of Shoppers Drug Mart.
In order to win the $12.4-billion purchase, Loblaw is required to sell 18 retail stores, mostly Shoppers Drug Mart (but also a few grocery stores) and transfer ownership of nine pharmacies within Loblaw stores to an independent operator.
As well the Competition Bureau said that it is imposing certain “behavioural restrictions” on Loblaw through temporary vendor relationship rules.
“This merger uniquely positions Loblaw to meet the most important consumer trends in the country, including urbanization and health and wellness,” said Galen Weston, executive chairman of Loblaw, in a press release. “In doing so, we will continue to deliver more choice, more value, and more convenience to Canadians.”
The merger would combine Loblaw, Canada’s largest grocery chain, with Shoppers, Canada’s largest drugstore chain. The combined retailer would operate a total of 2,738 stores and 1,824 pharmacies across the country, with annual sales topping $42 billion.
The acquisition has been in the works since July 2013, when Loblaw first proposed the merger. The bureau said it had since conducted an extensive review and concluded that without the agreement the acquisition would have led to increased prices and decreased services.
On top of Loblaw’s requirement to sell some of its locations, the Bureau made special note to outline some behavioural restrictions will be placed on Loblaw over agreements with suppliers for up to five years.
The Competition Bureau says it will continue to investigate certain pricing programs and agreements Loblaw has made.
Some suppliers have complained that the country’s largest grocery chains use unfair practices, and have called on an industry code of conduct.
Loblaw said it would “co-operate with the Competition Bureau in its continued review of these practices.”
In a statement, John Pecman, the commissioner of competition assured the Agreement addresses the most significant negative competitive effects of the merger. The agreement, he said, is meant to help consumers benefit from competitive prices in the retail sale of drugstore and pharmacy products in Canada.
The transaction is scheduled to close on March 28.
A full list of stores that Loblaw must sell, as well as the supplier-relationship rules, can be viewed in the Competition Bureau’s report here.