BUSINESS

Jean Coutu Group says it will spend $190 million to build bigger headquarters

05/29/2013 07:27 EDT | Updated 07/29/2013 05:12 EDT
LONGUEUIL, Que. - Jean Coutu Group (PJC) Inc. (TSX:TJC.A) said Wednesday it will spend nearly $190 million to build a new, larger headquarters and distribution centre in Varennes, Que.

The Quebec-based pharmacy retailer said it was looking to move because it had grown since initially setting up shop at its current location in Longueuil in 1976.

The new facilities, totalling 800,000 square feet, will allow the company to be more efficient and to better serve its network of affiliated drugstores, it said.

"In a context of continued growth, it became essential for us to expand our facilities, which was impossible on the site we presently occupy because of the lack of space," said chief executive Francois Coutu.

"The facilities in Varennes will be at the cutting edge of technology, guaranteeing high standards of productivity and enhanced performance."

Desjardins Securities analyst Keith Howlett said the new distribution centre could help consolidate the Quebec pharmacy market.

There are three major franchise systems in that province — Jean Coutu, Pharmaprix, the Quebec division of Shoppers Drug Mart Corp. (TSX:SC), and Metro's Brunet (TSX:MRU) — as well as three major co-operatives -- Uniprix, Familiprix and Proxim.

"Our view is that the assets most likely to be in play are Familiprix and Brunet," Howlett said in a note.

"An acquisition of such magnitude would, we assume, dramatically improve the economic return of the new distribution facility in Varennes."

Howlett said such an investment also suggests founder Jean Coutu and his family plan to retain control of the company "for the foreseeable future."

Construction on the new headquarters is set to begin next year, with operations transferring over in 2016.

The company's 1,000 employees will be moved gradually to the new facilities, which are also in the South Shore area near Montreal. Varennes is about 20 kilometres to the northeast of Longueuil.

The Jean Coutu Group operates a network of 407 franchised stores in Quebec, New Brunswick and Ontario.

Note to readers: This is a corrected story. An earlier version said the new location will be in Longueuil.