The Toronto stock market was higher Monday, led by strength in the consumer staples sector after grocery giant Loblaw Cos. Ltd. announced plans to buy Shoppers Drug Mart Corp. for $12.4-billion in cash and stock.
The S&P/TSX composite index gained 86.28 points to 12,548.46.
In a related move, Loblaw’s majority owner, George Weston Ltd., will subscribe for 10.5 million additional shares of the grocer for $47.55, the closing price for Loblaw shares on Friday. Proceeds from the Weston stock purchase will be used to pay a portion of the Shoppers purchase.
Traders also applauded the deal, sending Loblaw shares up $4.08 or 8.58 per cent to $51.63 while George Weston climbed $4.92 to $88.20. Loblaw is offering $33.18 in cash plus about six-tenths of a Loblaw common share for each Shoppers Drug Mart common share. Shoppers shares surged $12.84 or 26.59 per cent to $61.24 as holders of Shoppers stock also have the option of receiving $61.54 cash but the amount of cash is capped at $6.7-billion and the number of shares is capped at 119.9 million.
The Canadian dollar was down 0.13 of a cent 96.06 cents US.
U.S. indexes were lacklustre despite better than expected earnings from banking giant Citigroup.
Both the Dow industrials and S&P 500 closed at fresh record highs on Friday, and on Monday the Dow edged up 9.79 points to 15,474.09, the Nasdaq composite index was 2.98 points higher to 3,603.06 while the S&P 500 index rose one point to 1,681.19.
Other data showed that U.S. retail sales increased last month.
While overall sales were up, much of that increase was driven by higher gas prices and volatile auto sales. Core retail sales rose just 0.15 per cent, the weakest showing since January.
The report from the Commerce Department showed some weakness at retail stores, particularly department stores.
Citigroup turned in earnings of US$1.25 a share, ex-items, which beat analyst forecasts of $1.17. Its shares were up almost two per cent. Citigroup shares climbed 52 cents to $51.33.
The strong showing followed earnings on Friday from JPMorgan Chase and Wells Fargo that also beat forecasts.
There was also relief that a slowdown in China’s economic growth wasn’t as sharp as previously thought.
The world’s second-largest economy grew 7.5 per cent from a year earlier in the second quarter, slowing from the previous quarter’s 7.7 per cent, as weak trade and a clampdown on lending took their toll.
A clampdown on risky lending at state banks had contributed to worries that China’s growth might fall below seven per cent.
Other data showed that growth in Chinese factory output slowed to 9.3 per cent for the first half of the year, down 0.2 percentage points from the first quarter’s rate.
And retail sales growth decelerated to 12.7 per cent for the first quarter, declining by 1.7 percentage points from a year earlier.
However, signs of slowing Chinese growth depressed other commodity prices. Oil retreated with the August contract on the Nymex down 30 cents to $105.65 a barrel.
Oil is up about 10 per cent so far this month, jolted higher by unexpectedly sharp drops in U.S. crude and gasoline inventories, which suggest stronger demand. The energy sector was up 0.04 per cent.
The September copper contract on the New York Mercantile Exchange down three cents to $3.13 a pound. The base metals sector was off 0.4 per cent. First Quantum Minerals declined 30 cents to $15.48.
The utilities group was the strongest gainer next to the consumer staples group which houses Loblaw, Shoppers and George Weston, up 0.85 per cent. Just Energh Group rose 12 cents to $6.95.
The industrials component was ahead 0.7 per cent as Canadian Pacific Railway advanced $1.23 to $132.96.
The financials group was ahead 0.5 per cent while Manulife Financial improved by 24 cents to $18.20.
The TSX gold sector was slightly lower while August bullion gained $5.90 to US$1,283.50 an ounce.
Endeavour Silver Corp. were up 30 cents or 8.89 per cent to $3.67 after the miner said it is adjusting its second quarter revenue upward, saying the figure reported on July 10 was 12 per cent lower than it should have been. The revised revenues for Q2 are $71.3-million, up 76 per cent from $40.5-million in the same quarter last year. The company attributes the change to the marking to market of certain concentrate sales that had already received final pricing during the quarter.
North American markets ended last week with strong gains after U.S. Federal Reserve chairman Ben Bernanke reassured markets that the U.S. needs a “highly accommodative monetary policy,” or low interest rates, for the foreseeable future. The Fed is buying $85-billion a month in bonds to keep interest rates low.
In other corporate news, Fiera Properties Ltd., a joint-venture between Fiera Capital Corp. and Fiera Properties’ management team, is launching a diversified open-ended property fund. The Fiera Properties CORE Fund will be managed by Fiera Properties’ real estate portfolio management team. Fiera Capital shares added 13 cents to $12.08.
European bourses advanced with London’s FTSE 100 index ahead 0.59 per cent, Frankfurt’s DAX rose 0.17 per cent and the Paris CAC 40 was up 0.56 per cent.