Metro Inc. (TSX:MRU) says it is "engaged in exclusive discussions" regarding a merger with Quebec-based pharmacy chain Jean Coutu Group (TSX:PJC.A).
Metro announced Wednesday the pair are discussing a deal in which it would acquire Jean Coutu at a price of $24.50 per share, to be paid 75 per cent in cash and 25 per cent in shares.
This price was established in "the course of negotiations" between the two firms ahead of a non-binding letter of intent dated Aug. 22, Metro added.
"The Coutu family has indicated its intention to support the proposed transaction," Metro said in a press release Wednesday.
This announcement comes after regulators suspended trading of both companies within minutes of each other earlier Wednesday morning.
Metro added that both firms will not comment any further, but will inform stakeholders and the public of significant developments regarding the proposed merger.
Investors reacted positively to the news, with Jean Coutu shares jumping 6.11 per cent to $24.50, and Metro shares climbing 4.24 per cent to $41.79.
Jean Coutu has more than 400 stores in Quebec, New Brunswick and Ontario, while Metro has more than 600 stores in Quebec and Ontario.
In January 2013, when Metro made a surprise announcement that it was selling 48.2 per cent of its 25-year investment in convenience store operator Alimentation Couche-Tard, industry observers speculated that the grocer was eyeing an acquisition or looking to reward its shareholders.
Analysts at the time suggested Jean Coutu could be a contender.
After grocery giant Loblaws Companies Ltd. (TSX:L) completed its $12.4-billion acquisition of Shoppers Drug Mart in 2014, there was more speculation about what Jean Coutu's move would be in response.
