Jean Coutu Group Acquires Eckerd Bannered Stores

Quebec-headquartered the Jean Coutu Group (PJC) Inc. became the fourth-largest drugstore chain in North America through the acquisition of 1,539 Eckerd bannered stores, six regional distribution centers, the Eckerd headquarters in Largo, Florida, the Eckerd trade name and other related assets from TDI Consolidated Corp., a wholly-owned subsidiary of JC Penney Company, Inc. The deal closed on July 31, 2004.

The total consideration of approximately US$2.5 billion for the acquisition along with the refinancing of the Jean Coutu Group existing indebtedness, were financed through the combination of (i) a public offering in Canada of $582 million of subscription receipts issued to a syndicate of underwriters led by Merrill Lynch Canada Inc. and National Bank Financial Inc., which were exchanged into class A subordinate voting shares of the company, (ii) the issuance in Canada and in the US of US$350 million of 7.625 per cent senior notes due in 2012 and the issuance of US$850 million of 8.5 per cent senior subordinated notes due in 2014, such notes being guaranteed by the subsidiaries of the Jean Coutu Group and underwritten by Merrill Lynch & Co., Deutsche Bank Securities and National Bank Financial on a US Securities and Exchange Commission Rule 144A private placement basis, and (iii) senior secured credit facilities of US$1.7 billion from a syndicate of financial institutions arranged in Canada and in the US by Merrill Lynch, Pierce, Fenner & Smith Inc., National Bank of Canada and Deutsche Bank Trust Company Americas.

The Jean Coutu Group became the fourth largest drugstore chain in North America, the second largest both in Canada and in the Eastern United States with a combined network of 2,209 stores. The company was represented by Caroline Guay, in-house general counsel, and corporate secretary. A team of outside counsels, which included McDermott Will & Emery in the US and Fasken Martineau DuMoulin in Canada were hired to assist in the transaction.

The acquisition and financing was spearheaded and coordinated by Yvon Martineau (M&A and securities) of the Montreal office of Fasken Martineau DuMoulin. In addition, the Jean Coutu Group was also represented by a Fasken Martineau team that included Peter Villani, Mireille Tremblay, Jean-Pierre Chamberland, Sébastien Hébert and Daniel Yelin (securities), Marc Novello and Martin Racicot (banking), Sylvie Bourdeau and Lori Seidman (corporate), Alain Ranger, Gilles Carli and Thomas Copeland (tax) in Montreal; Philippe David in New York; and John Abraham and Belinda James in Toronto. Fasken Martineau was assisted by McDermott Will & Emery in the US, with a team that included Dennis White, Spencer Klein, Gregory Puff, Eric Reimer, Elliot Hinds, Mark Mihanovic, Felise Feingold, Christopher Brown, Hal Schwartz and Q. Scott Kaye; and in Nova Scotia and New Brunswick by Charles Reagh, Lee Bell-Smith and Andrew McFarlane of Stewart McKelvey Stirling Scales.

JC Penney was represented by in-house counsel Charles Lotter, Jeffrey Vawrinek and Robert Hood, and by Jones Day, with a team that included Robert Estep, Lisa Durham, Gregory Kopel, Jason Krieser, Amy Nelson, Mark Robinson, Steven Stennett, Dennis Drapkin, Scott Frodyma, James Carey, Alan Miller, Michael Blais, Frederick Rerko, Michelle Brown, Robert Jones, Phillip Proger and Betty Ungerman.

The equity underwriting syndicate was represented in Canada by André Roy, J. Anthony Penhale, Nicolas Vanasse, Véronique Faucher and Marie-Andrée Beaudry of Stikeman Elliott for the public offering of subscription receipts. The notes underwriting syndicate and the banking syndicate were represented in the US by Fried, Frank, Harris, Shriver & Jacobson in New York, with a team that included Valerie Ford Jacob, Arthur Kaufman, Emil Buchman, Stuart Gelfond, Joshua Wechsler, Deborah Yadegari, Meredith Kurzban and Damian Ridealgh. The notes underwriting syndicate and the banking syndicate were represented in Canada by McCarthy Tétrault, with a team that included Michel Deschamps and Richard O’Doherty (financial services), Claude Desaulniers (tax), Louis-Martin Dubé and Mylany David (real property and planning) and Benjamin Silver (securities) in Montreal; Michael Polowin (real property and planning) in Ottawa; and Andrew Parker (securities) in New York.