Canada's Jean Coutu Group to hit road with $1.2 billion bond deal

By Paul Deckelman

New York, July 6 - Canadian pharmacy chain operator Jean Coutu Group will bring a $1.2 billion junk bond issue to market later this month and will use the proceeds of the Rule 144A placement of 10-year notes to help pay for its acquisition of the Eckerd drugstore chain from U.S. retailer J.C. Penney Co. Inc., high yield syndicate sources said Tuesday.

Deutsche Bank Securities and Merrill Lynch & Co. will be the joint bookrunning managers on the deal, which will also have National Bank of Canada as part of the underwriting syndicate. The bonds will be non-callable for the first five years after issue.

The company's investor relations department confirmed that a bond deal was in the works and said that senior company officials, including the company's chairman and chief executive officer, Jean Coutu, and its chief financial officer, Andre Belzile, would be "on the road" this week marketing the deal to potential investors, first in Montreal and other cities in Canada, and after that, in the United States. The department expects that marketing effort to last at least through next week.

A market source indicated, however, that the roadshow would not formally begin till Friday and would then go for 10 days, wrapping up on July 19. Pricing would be expected sometime around the 19th or 20th, the source said.

Jean Coutu, based in Longueuil, Que., is currently the third largest pharmacy operator in Canada, with 650 stores there, and runs another 330 Brooks Pharmacy outlets in seven Northeastern states in the United States. The company said in early April that it would pay $2.375 billion to acquire some 1,500 Eckerd stores from Plano, Tex.-based Penney, which was looking to divest the underperforming chain so it could concentrate on its more profitable department store operation. Jean Coutu is buying the Eckerd stores in 13 states in the Northeast and Mid-Atlantic regions, as well as the chain's home office in Florida. The remainder of the 2,735-store chain, or about 1,235 stores in the South, mostly in Texas and Florida, are being sold to CVS Corp., along with Eckerd's mail-order and pharmacy management businesses, for $2.15 billion.

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