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Metro’s Path to Success in a Competitive Market

By Chirag Gandhi

Metro Inc under shareholder pressure as the market consolidates

In an era of consolidation in the grocery and drugstore industries, two Canadian giants are looking to team up. Metro Inc is poised to finalize the acquisition of Jean-Coutu (PJC) for $24.50 per share in a 75% cash deal worth of $4.5B. This latest news is not surprising amidst the successful acquisition of Shopper’s Drug Mart (Pharmaprix in Quebec) by Loblaw Co (L) for $12.4B in July 2013. The Canadian grocery chain market is in a consolidation phase and currently dominated by the “Big Three.” Early this year, Queen’s University reported the market share of the Big Three as follows:  Loblaw had a market cap of $28.01B, followed by Metro Inc (MRU) at $9.50B and Empire Company (EMP), owner of the Sobeys and Safeway chains, at $4.53B. Ever since Loblaw’s acquisition of Shopper’s Drug Mart, shareholders of Metro have put pressure on management to expand in order to compete with Loblaw, even with falling margins on food and merchandise. In 2013, Metro Inc came close to acquiring Safeway in West