After much discussion regarding Loblaw purchasing Shoppers Drug Mart for $12.4 billion, the shareholders of Shoppers voted earlier this month (September) and 99.89% of all votes casted were in favour of the deal (Business News Network). Once Loblaw gets the approval from the Ontario Supreme Court, its competition in the area of groceries will be slightly less as the two companies will be working together instead of competing against each other for more customers and revenue. This however can negatively affect the price of goods for consumers. This deal also provides Loblaw with a more developed and renowned pharmacy sector. However, the combination of Loblaw and Shoppers will still face high levels of competition from major US companies currently in Canada such as Walmart and the Target.
Is Shoppers worth the $12.4 billion that Loblaw has proposed? I believe it is as Shoppers is known for its variety of pharmaceutical services and since most Shoppers are open 24/7, consumers will have access to Loblaw house brands or food during odd hours of the night when larger companies are inaccessible. Combining two Canadian companies also promotes more protection from American giants currently present or entering Canada.
Is the deal beneficial for consumers?
No: The deal can result in a decrease of competitive prices and previously established systems (Shopper’s Optimum Card) may disappear unless both companies agree to keep it.
Yes: A greater variety of goods present in each store and an expansion of already established systems may be possible.
At this time, we can’t be certain about the benefits or consequences of Loblaw purchasing Shoppers Drug Market. We have to wait for actions to be taken and evaluate those actions based on their influences on consumers.
References:
http://www.huffingtonpost.ca/2013/07/15/shoppers-drug-mart-loblaw_n_3597522.html
http://www.bnn.ca/News/2013/9/12/Shoppers-gets-shareholders-approval-for-takeover-by-Loblaw.aspx