Loblaw / Shoppers Drug Mart

Canada’s Loblaw Companies Limited, owner of the Loblaws grocery chain, hopes its $12.4 billion takeover of Shoppers Drug Mart is a prescription for a variety of challenges in the retail food sector. The deal was announced July 15, about a month after Sobeys—a major challenger to Loblaws’ mantle as Canada’s largest grocer—bought the Canadian assets of Safeway, including 199 in-store pharmacies.

The move to acquire Shoppers, an iconic Canadian brand, is significant in the consolidating grocery and retail pharmacy sectors. Increased competition from retailers such as Walmart and Target has squeezed margins for traditional players such as Loblaws, Sobeys and Metro, the other major Canadian grocery chain.

Loblaw will pay $61.54 a share for Shoppers, a 29.4 percent premium to Shoppers’ preannouncement trading average. About 54 percent of the deal is cash, and the rest is funded in Loblaw shares. When the deal closes, Shoppers shareholders will own 29 percent of Loblaw, with George Weston Limited owning 46 percent, after acquiring an additional $500 million in Loblaw shares; the funds from that deal will help to pay for the Shoppers acquisition. Shoppers shareholders approved the deal in September, but it still requires regulatory approval.

Shoppers Drug Mart will continue to operate as a stand-alone brand and a separate division of Loblaw, although Loblaw said it will capitalize on $300 million in efficiencies and cross-marketing opportunities over the next three years that come with adding 1,200 retail pharmacies to its 1,400 stores. Combined, the two chains are a retail juggernaut, with 2012 sales of $42 billion.

For acquirer Loblaw Companies Limited (Brampton, Ontario)

Borden Ladner Gervais: Competition: Robert Russell, Brendan Wong and associates Denes Rothschild and Zirjan Derwa. (They are in Toronto.)

For Loblaw controlling shareholder George Weston Limited

In-House: executive vice-president and chief legal officer Gordon Currie.

Torys: Corporate/M&A: Peter Jewett and Cornell Wright. Litigation: James C. Tory and associates Adrienne DiPaolo, David Forrester, William Hooper and Reagan Kennedy. Securities: Andrew Gray and Glen Johnson. Pensions and benefits: Mitch Frazer and associates Andrew Gray and Lynne Lacoursiere. Antitrust: Jay Holsten, Omar Wakil and associate Arezor Farivar. Intellectual property: Conor McCourt. Tax: John Unger. Finance: Amanda Balasubramanian, Adam Delean and Adrienne Glen. (They are in Toronto.) Torys has represented George Weston Limited since the early 1990s.

For target Shoppers Drug Mart Corporation (Toronto)

In-House: Executive vice-president–legal affairs and general counsel Frank Pedinelli and corporate secretary and senior vice-president of legal affairs Adam Grabowski.

Osler, Hoskin & Harcourt: Corporate/M&A: Douglas Bryce, Donald Gilchrist, Clay Horner, Emmanuel Pressman and associates Alex Gorka and David Vernon. Competition: Peter Glossop and Shuli Rodal. Tax: Firoz Ahmed, Dov Begun and associate Amanda Heale. (They are in Toronto.) Osler has a long-standing relationship with Shoppers Drug Mart, dating back to Shoppers’ acquisition by the Imasco conglomerate in 1983, its subsequent sale to a consortium of institutional investors including Kohlberg Kravis Roberts & Co. in 2000 as part of the breakup of Imasco, and its initial public offering and listing on the Toronto Stock Exchange in 2001. —L.K.

Hudson’s Bay / Saks Incorporated

Manhattan’s Fifth Avenue is going to get a major Canadian presence, with the $2.9 billion purchase by Hudson’s Bay Company (HBC) of luxury retail chain Saks Inc. Hudson’s Bay is the oldest company in North America, with roots dating back to 1670 as a fur trader. Saks is the latest U.S. acquisition for HBC; it bought Lord & Taylor about a year ago and features the Lord & Taylor clothing and home accessories brands in its department stores across Canada. HBC also operates a chain of department stores in Canada under its own name.

HBC, which was acquired five years ago by private equity firm NRDC Equity Partners for $1.1 billion, will pay $16 in cash per share for Saks in the friendly deal, a premium of about 30 percent over Saks’ average share price in May, before rumors of the deal spilled into the business media.

HBC will introduce the Saks brand to Canada with seven major stores planned over two years. HBC will also open as many as 25 Saks Off 5th discount stores in Canada, and is looking at also expanding Saks into Asia. “We’d be one of the first to have a department store as a global brand,” HBC president Bonnie Brooks said in September, adding that European expansion is also possible, but that Asia is a more logical move.

Saks will maintain its New York headquarters and operate separately from HBC’s other retail brands. HBC expects the transaction to close late this year.

For acquirer Hudson’s Bay Company (Toronto)

In-House: Senior vice-president and general counsel David Pickwoad.

Stikeman Elliott: M&A: John Ciardullo, Ian Putnam and associates Craig Broadhurst, Kaleb Honsberger, Laure Levine, Jonah Mann and Kristina Vranjkovic. Antitrust: Jeffrey Brown. Real estate: Doug Klaassen and associate Annie Pyke. Litigation: Eliot Kolers. Tax: Dean Kraus. Banking: Jennifer Legge and associate Courtney Wilson. (They are in Toronto.) Stikeman has advised the Canadian retailer since NRDC purchased it in 2008. Stikeman also represented Zellers, an HBC subsidiary, in connection with lease transfers on up to 220 stores to Target Corporation in 2011 for $1.85 billion as part of Target’s expansion into Canada. HBC’s in-house counsel, David Pickwoad, was previously a senior associate at Stikeman.

Willkie Farr & Gallagher: M&A: Gregory Astrachan, Gordon Caplan and asso­ciates Howard Block, Ruchi Patel and Daniel Philion. Finance: Micheal Zinder. Real estate: Steven Klein. Tax: Henry Cohn. Executive compensation and employee benefits: Michael Katz. Litigation: Jeffrey Korn. (They are in New York.) HBC is a new client for Willkie Farr & Gallagher.
For equity investor Ontario Teachers Pension Plan
Davies, Ward, Phillips & Vineberg: M&A: Peter Hong, Vince Mercier, Jeff Nadler and associate Jay Galbraith. Tax: Ian Crosbie and associate Raj Juneja. Competition: Adam Fanaki. (All are in Toronto except Nadler, who is in New York.) The pension plan has made an equity investment of $500 million in NRDC.
For target Saks Incorporated (New York)
In-House: Executive vice-president and general counsel Michael Brizel.
Watchell, Lipton, Rosen & Katz: Corporate: Joshua Cammaker, Gordon Moodi, of counsel Patricia Vlahakis and asso­ciates Jenna Levine and Mark Stagliano. Antitrust: Damian Didden and associate Franco Castelli. Restructuring and finance: Joshua Feltman and associates Emily Johnson and Gregory Pessin. Tax: Jodi Schwartz and associate Michael Sabbah. Executive compensation and benefits: Adam Shapiro and associate Rohit Nafday. (They are in New York.) —L.K.

Davis + Henderson / Harland Financial Solutions

Davis + Henderson, a Toronto-based technology firm that provides computer services to much of the North American banking sector, has bought American rival Harland Financial Solutions from Harland Clarke Holdings for $1.2 billion in cash. The deal, announced in late July, closed Aug. 16.

San Antonio–based Harland Clarke Holdings is a wholly owned subsidiary of Ronald Perleman’s MacAndrews & Forbes Holdings. Based in Lake Mary, Fla., Harland Financial Solutions was the fourth-largest core banking technology firm in the United States, with almost 1,400 employees. The transaction significantly increased Davis + Henderson’s U.S. market presence, adding 5,400 American financial customers, and tripled its base in the United States to more than 6,200 financial institutions.

In Canada, D+H is best known as a company that provides consumers and businesses with their printed checks. It still does that, but the firm has dramatically shifted its focus over the last seven years to financial technology systems and services. The acquisition is expected to increase D+H’s annual revenue to $1.1 billion. About 36 percent of that will come from the U.S., compared with about 8 percent before the purchase.

D+H is funding the acquisition through a $600 million bought-deal financing arrangement that was co-led by Scotia Capital, RBC Dominion Securities and CIBC World Markets. The remaining $600 million of the acquisition price was funded through a syndicate of private placement lenders.

For acquirer Davis + Henderson Corporation (Toronto)

Stikeman Elliott: M&A: Martin Langlois and associates Daniel Glavin, Nasim Jamasbi, Meghan Jones, Jonathan Moncrieff and Chris Yung. Equity financing: associates Aniss Amdiss and Kevin Smyth. Debt financing: associates Christen Daniels and Tim McCormick. Banking: Marie Garneau, Andrew Grant and Justin Parappally. (They are in Toronto.)

For target Harland Financial Solutions (Lake Mary, Fla.)
In-House: For MacAndrews & Forbes: senior vice president Edward Taibi and executive vice president of law Steven Fasman. For Harland Clarke: senior vice-president and general counsel Judy Norris, senior vice president and deputy general counsel Debra Keener and vice president of product management and legal compliance Mitch Lucas.
Paul, Weiss, Rifkind, Wharton & Garrison: Corporate: Robert Schumer and counsel Ross Feldston. Finance: Terry Schimek and Robert Zochowski Jr. Tax: Jeffrey Samuels. Employee benefits: counsel Reuven Falik. Intellectual property: counsel Mena Kaplan. (All are in New York.) —L.K.

Louisiana-Pacific / Ainsworth Lumber

Louisiana Pacific Corp. is buying Vancouver-based Ainsworth Lumber Co. Ltd. in a $900 million cash and stock deal. Louisiana-Pacific, a leading manufacturer of wood-based building materials, offered $3.76 a share on Sept. 4, a 30 percent premium over Ainsworth’s pre-deal trading price. The Nashville-based buyer will also assume Ainsworth’s long-term debt of about $379 million.

Ainsworth has four operations in British Columbia, Alberta and Ontario producing oriented strand board, a building material often used instead of plywood in new construction, primarily for North American and Asian markets.

Ainsworth shareholders were scheduled to vote on the deal on Oct. 29. Ainsworth’s largest shareholder, Brookfield Asset Management, which holds a 54 percent stake for funds it manages, had already agreed to support the transaction. The purchase, which is friendly, requires two-thirds support from shareholders and regulatory approvals. Louisiana-Pacific expects the deal to close before the end of the year.

For acquirer Louisiana-Pacific Corp. (Nashville)

In-House: Vice-president and general counsel Mark Fuchs.

Jones Day: M&A: Mark Betze and asso­ciates Alain Dermarkar and Melissa Kalka. Banking and finance: Mark Robinson. Tax: Les Droller. (All are in Dallas except Droller, who is in Washington, D.C.) Betze has advised the company on several finance matters in the past, including a $350 million exchange offer of senior notes last year.
Stikeman Elliott: M&A: John Anderson, Jennifer Honeyman, Pierre-Yves Leduc, Steeve Robitaille and associates Julien Lefebvre, Taylor Little, Hadrien Montagne, Pierre Raymond and Zev Zelman. Tax: Luc Bernier and associate Corine Di Maria. Competition: Jeffrey Brown, Paul Collins and associate Ashley Piotrowsk. (All are in Montreal except Anderson, Honeyman and Little, who are in Vancouver, and Brown, Collins and Piotrowski, who are in Toronto.)
Orrick, Herrington & Sutcliffe: Antitrust and regulatory: Robert Reznick, Pamela Davis, David Smutny, of counsel Patricia Zeigler and associates Meg Hennessy, Ross Paolino and Ryan Quillian. (All are in Washington, D.C., except Davis and Hennessey, who are in San Francisco.)
For Ainsworth Lumber Co. Ltd. (Vancouver)
Skadden, Arps, Slate, Meagher & Flom: Corporate: Christopher Morgan. Antitrust: James Keyte and counsel Kenneth Schwartz. FCPA/Regulatory: Charles Walker and counsel Andrew Lawrence. (Morgan is in Toronto; Keyte and Schwartz are in New York; and Walker and Lawrence are in Washington, D.C.)

Goodmans: Corporate/M&A: Tim Heeney, Kirk Rauliuk and associate Jeremy Weisz. Competition: counsel Richard Annan. Investment Canada Act: Joel Schachter. Employment: Joe Conforti. Tax: Carrie Smit and associate Mark Biderman. (All are in Toronto.) Goodmans acted as counsel to Ainsworth on its 2012 refinancing plan, which included a Can.$175 million rights offering and a $350 million note offering. —L.K.

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