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Loblaw to tap Asian market

Company to purchase T&T Supermarket chain to tap into growing market in Canada

Loblaw Companies Ltd. today announced a major push into Canada's fast-growing Asian market with a $225 million offer to purchases T&T Supermarket.

The 17-chain store has been sometimes called "the Asian Loblaw," noted T&T chief executive officer Cindy Lee. T&T shareholders have entered into an agreement to be bought by Loblaw subsidiary Loblaws Inc. The pruchase price will be funded by $191 million in cash and the remaining through preferred shares issued by T&T, the value of which will be tied to the future performance of the business.

"We are delighted with this acquisition," said Loblaw executive chairman Galen G. Weston. "T&T's talented management team and colleagues have developed what we believe are the best Asian stores in Canada, which will be used to help Loblaw extend its ethnic offering to better serve Canada's largest-growing customer segment."

T&T Supermarket began operations in 1993 and now operates stores in British Columbia, Alberta and Ontario, as well as four distribution centres, including three in Vancouver and the other in Toronto. T&T Supermarket offers a robust Asian food offering with emphasis on fresh and ready to consume meals.

"Some of our customers have a nickname for us - The Asian Loblaw. Today, we are proud it has become a reality," Lee said in a statement. "This acquisition recognizes all of our employees' hard work over the years and the great business we have built. Together with Loblaw, we will continue to celebrate our authenticity while maintaining and enhancing our customers' shopping experience.

"With the strong backing of Loblaw and the commitment of our employees, we look forward to continued growth and effectively serving Asian food to even more families across Canada." The transaction is expected to close before year's end, subject to consents and regulatory approval.

The acquisition is expected to be accretive to Loblaw earnings in the first year following closing. Sales of the T&T business in the 12 months ending June 30 were approximately $514 million. TD Securities Inc. acted as financial advisor to T&T on the transaction. The news came as Loblaw reported its second conseuctive strong quarter, signalling the problems that had beset it for the last 2 1/2 years may be finally waning. Profit jumped 37.9 per cent to $193 million, while sales grew 2.8 per cent to $7.2 billion for the quarter ending June 20, the company said in a separate statement today.

Sales at stores open more than a year, considered a key retail measure, rose 2.5 per cent in the quarter. However, the company cautioned it may be unable to maintain the momentum into the second half of the year. "This quarter's improvement in earnings was largely cost and gross margin driven," Weston said. "This is a trend that we do not expect to continue." The company said it is facing a combination of waning inflation, more intense competition and higher investments in store renovations and computer systems . "We expect sales and (profit) margins to be significantly challenged," Weston said.



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