Canadian Firm Picks Up 1,549 Drug Stores

LONGUEUIL,QUEBEC-The locally based international drugstore chain the Jean Coutu Group Inc. has completed the acquisition of approximately 1,549 Eckerd drugstores and support facilities in the Eastern US for about $2.5 billion (including $112 million in closing costs). The seller was JCPenney Co. Inc., which concurrently closed on the sale of another 1,260 Eckerd stores to CVS Corp. for $2.1 billion. The Jean Coutu Group’s piece of the Eckerd chain makes it the fourth largest drugstore chain in North America, with a combined network of 2,204 stores, and the second largest in the Eastern US. The acquisition was financed with $1.7 billion in debt financing; a $1.2-billion notes offering; and a previously announced public offering in Canada and private placement in the US of 33.35 million Subscription Receipts, issued for gross proceeds of $436.8 million that will be exchanged for Class A Subordinate Voting Shares of the Jean Coutu Group on a one-to-one basis. The Group’s US operations employ now include 1,549 Eckerd and 336 Brooks drugstores, all corporate owned and located in 18 states of the Northeast, mid-Atlantic and Southeastern US. The Group’s Canadian operations and the drugstores affiliated to its network comprise 277 PJC Jean Coutu drugstores, 40 PJC Clinic and 2 PJC Sante Beaute, all franchised, in Quebec, New Brunswick and Ontario.The $2.2-billion cash acquisition by Woonsocket, RI-based CVS makes it the largest pharmacy retailer in the nation, with about 5,000 stores in 36 states and Washington, DC. In addition to 1,260 Eckerd drug stores, CVS’ deal included Eckerd’s $1-billion mail order and pharmacy benefits management businesses and three Eckerd distribution centers. The acquisition gives CVS a 13% share of the nation’s retail prescriptions. The majority of the stores CVS acquired are located in Florida and Texas, while others are located in Louisiana, Oklahoma, Mississippi, Arizona, Missouri, Kansas and Alabama. The distribution centers are located near Dallas and Houston, and Orlando.