Divestitures Key To Resolving Competition Concerns In Loblaw Transactions

OTTAWA, August 12, 1999 — The Competition Bureau announced today that it will not challenge the acquisition by Loblaw Companies Limited of Provigo Inc. and of the grocery assets in Atlantic Canada of The Oshawa Group (known as "Agora Food Merchants").

Due to competition concerns raised during the Bureau's investigation, Loblaw agreed to divest its interests in markets in Ontario, Quebec, Nova Scotia, New Brunswick and Newfoundland. As a result of these significant divestitures, the Competition Bureau has concluded that these mergers will not likely cause a substantial lessening or prevention of competition. There will also be significant new competitors in many markets.

"History has shown that whenever a major new player enters a market, consumers benefit from lower prices, improved service and product choice," said Konrad von Finckenstein, Commissioner of Competition. "As a result of these transactions, Métro-Richelieu becomes a major player in Ontario and Loblaw enters Quebec and increases its presence in Atlantic Canada."

The acquisition of Provigo Inc., one of the leading grocery retailers in Quebec, was completed on December 9, 1998. It also included the acquisition of the Loeb chain of grocery stores, which is located primarily in Ontario. Competition concerns were identified in a number of Loeb markets. Consequently, on June 19, 1999, Loblaw divested its interest, in 24 markets in Eastern and Northern Ontario, two warehouses and the Loeb trademark to Métro-Richelieu (Métro). As a result, Métro became a significant new player in the grocery business in Ontario.

To address the remaining competition concerns in Ontario and Quebec, Loblaw has agreed to divest its interests in stores in an additional eight markets. Should Loblaw be unable to divest these stores by December 31, 2000, the Bureau retains the right to have these assets placed with a Trustee for divestiture.

Loblaw will continue to face effective competition in Ontario from such chains as Sobeys, A&P/Dominion and Métro along with several strong regional players including Costco, Longo's and Commisso's.

With the acquisition of Provigo, Loblaw becomes a major food retailer in Quebec where prior to the merger, it only had four stores. The Quebec retail grocery market will see Loblaw competing through Provigo with Métro and Hudon et Deaudelin (recently acquired by Sobeys from the Oshawa Group).

In Atlantic Canada, Loblaw acquired three warehouses and the rights to supply 80 stores in 68 markets supplied previously by Agora Food Merchants under the names IGA, Traditions and Omni. This acquisition firmly establishes Loblaw as the second largest wholesaler in Atlantic Canada after Sobeys and in many local markets, the acquisition represented new entry for Loblaw.

Agora's grocery division was incurring significant losses and was not seen as a vigorous and effective competitor. To alleviate competition concerns, Loblaw agreed to divest its interests in stores in Halifax, Dartmouth and New Minas, Nova Scotia, and St. John's, Newfoundland. In addition, the Bureau will monitor the impact of the merger in Marystown, Newfoundland, Grand Falls, New Brunswick and Antigonish, Nova Scotia.

Should Loblaw be unable to divest these stores by December 31, 2000, the Bureau retains the right to have these assets placed with a Trustee for divestiture.

The Competition Bureau is an independent law enforcement agency that is responsible for merger review and the lawful conduct of business in Canada, as defined by the Competition Act.

For backgrounders please call the Bureau's toll free number for assistance:
1-800-348-5358.