Metro in talks with Jean Coutu about possible merger

Grocery giant Metro says it is "engaged in exclusive discussions"regarding a possible merger with the Quebec-based Jean Coutu pharmacy chain.

Metro announced Wednesday the two 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.

• Grocery prices set to deflate,Loblawand Metro say
• JeanCoutuprofit drops 10% on increased costs

Theprice 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.

Earlier Wednesday,regulators suspended trading of both Jean Coutu and Metro,ledby president and CEO Eric LaFlche.

The Investment Industry Regulatory organization of Canada said at 9:29 a.m. it was putting a temporary halt to trading in Jean Coutu, and suspended Metrotrading six minutes later.

• Metro profit beats estimates despite lower produce, meat, dairy prices
• JeanCoutuprofit dips to $54 million

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 $24.50and Metro shares climbing 4.24 per cent to $41.79.

Jean Coutu has more than 400 stores in Quebec, New Brunswick and Ontario.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 speculatedthe 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 Loblaw 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.