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Metro prepared for ‘any acquisition in Canada,’ CEO says

Peter Power/The Globe and Mail

Metro Inc. has the chops to make a major retail acquisition in Canada if the right opportunity comes along, says its chief executive.

But there's no pressure to expand quickly even if the tough economic climate and heightened competition don't bode well for organic growth, said president and chief executive officer Eric La Flèche.

"We can consider just about any acquisition in Canada," Mr. La Flèche said after the company posted first-quarter net profit of $121.4-million or $1.23 per share, compared with $103.7-million or $1.01 per share in the year-earlier period.

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Revenue in the quarter reached $2.7-billion, up from $2.6-billion.

Chief financial officer François Thibault said Metro can easily increase its leverage for an acquisition without upsetting its investment-grade rating.

"We do have the flexibility."

Mr. La Flèche acknowledged that organic growth isn't easy in a context of low food inflation, high consumer debt and beefed up competition from new and established rivals such as Wal-Mart and Target Corp.

"Organic growth is a challenge, but we've met that challenge over the past few years and we expect to continue to meet it," he said after the shareholders' meeting in Montreal on Tuesday.

Speculation has swirled recently over what the Quebec-based grocer that is also active in Ontario will do with the proceeds of about $415-million from the sale of almost half its stake in convenience-store giant Alimentation Couche-Tard Inc.

Among Metro's options are an acquisition, investments in existing stores to accelerate growth and improve efficiencies, returning cash to shareholders via a share buyback and creating a special dividend, said Mr. La Flèche.

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Acquisition talk in Canada's retail sector has heated up lately as long-running rumours intensify that Safeway Inc. will put its Canadian stores up for sale and that Metro, Loblaw Cos. Ltd. and perhaps other buyers would be eager to scoop them up.

Other takeover targets mentioned include British Columbia's Overwaitea grocery chain and drugstore companies Jean Coutu Group (PJC) Inc. and Familiprix.

Mr. La Flèche said Metro will take all the time it needs to decide what to do with the Couche-Tard proceeds, including returning cash to shareholders.

Indeed, Metro also announced on Tuesday that it's buying back about 2 million shares as part of its regular course issuer bid program. It can buy up to 6 million shares per year but has been averaging only about 4 million shares a year.

Metro is studying the possibility of buying back the maximum 6 million shares this year with some of the Couche-Tard proceeds, said Mr. La Flèche.

Meanwhile, at the annual meeting, shareholders approved a company proposal to establish an advisory "say on pay" policy on executive compensation that is not binding upon the board. A similar proposal by a shareholder activist group was rejected.

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The fact that Montreal-based Metro does not put an acute accent in the "e" to make its name more French was an issue, as well, at the meeting.

Mr. La Flèche urged shareholders to vote against the activist shareholder group's proposal in favour of a French name.

Members of the Mouvement d'éducation et défense des actionnaires argued that Quebec has only one official language – French – and that the province's French-language charter stipulates that the name of a company must be in French.

"The Metro name without an accent is our trademark," Mr. La Flèche said.

In the end, shareholders overwhelmingly defeated two proposals – one to use the French name in all signs and corporate communications and one to change the legally registered corporate name to Métro.

Mr. La Flèche also told shareholders that Metro plans to open its first Adonis store in Toronto this spring and is looking at opening at least one elsewhere in Ontario this year.

Metro acquired a 55-per-cent interest in Montreal-based Adonis and distributor Phoenicia in 2011. The five-story Adonis chain specializes in Mediterranean and Middle Eastern food.

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