The S&P/TSX composite index gained 66.17 points to 12,528.34.
Loblaw is offering $33.18 in cash plus about six-tenths of a Loblaw common share for each Shoppers Drug Mart common share. Traders liked the deal, sending Loblaw shares up $2.58 or 5.43 per cent to $50.13. Shoppers shares surged $11.72 or 24.21 per cent to $60.12. Shoppers stockholders 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.
"There's definitely a benefit here for Loblaws", said Craig Fehr, a Canadian markets specialist at Edward Jones in St. Louis, Mo.
"I think it's the fact the market is applauding the deal from a long-term growth perspective for Loblaws and the premium that Shoppers shares are getting."
In a related move, Loblaw's majority owner, George Weston Ltd. (TSX:WN) 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 deal will be used to pay a portion of the Shoppers purchase. George Weston climbed $3.72 to $87.
The Canadian dollar was down 0.17 of a cent to 96.02 cents US.
U.S. indexes were slightly higher amid better than expected earnings from banking giant Citigroup.
The Dow industrials and S&P 500 moved further into record high territory. The Dow edged up 19.96 points to 15,484.26, while the Nasdaq composite index was 7.41 points higher to 3,607.49. The S&P 500 index rose 2.31 points to 1,682.5.
Other data showed U.S. retail sales increased last month due in large part to higher gas prices and volatile auto sales.
Core retail sales rose just 0.15 per cent, the weakest showing since January, as 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 $1 to $51.81.
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 clamp down on risky lending at state banks took their toll.
The TSX consumer staples group jumped seven per cent and also had support from Jean Coutu Group (TSX:PJC.A), which was ahead 89 cents to $10.98. There had been speculation earlier this year that grocer Metro Inc. (TSX:MRU) might make a move to buy the drugstore chain.
The utilities group was up 1.44 per cent. Algonquin Power and Utilities (TSX:AQN) rose 14 cents to $7.39.
The financials group was ahead 0.48 per cent while Royal Bank (TSX:RY) gained 46 cents to $62.26.
The industrials component was ahead 0.37 per cent as Bombardier Inc. (TSX:BBD.B) advanced five cents to $4.96.
The TSX gold sector was ahead about 0.35 per cent while August bullion gained $5.90 to US$1,283.50 an ounce.
A Chilean appeals court ruled that Barrick Gold Corp. (TSX:ABX) must keep all its environmental promises before moving forward with construction of the Pascua-Lama mine at the very top of Chile’s mountainous border with Argentina. They also said Barrick must repair environmental damage to the Estrecho and Huasco rivers, and monitor the condition of three glaciers next to the mine project. Barrick closed 20 cents higher to C$15.69.
Oil erased early losses and the August contract on the Nymex climbed 37 cents to US$106.32 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 flat.
The signs of slowing Chinese growth depressed other commodity prices. The September copper contract on the New York Mercantile Exchange was down one cent to US$3.14 a pound. The base metals sector was off 0.16 per cent. First Quantum Minerals (TSX:FM) declined 32 cents to $15.46.
Endeavour Silver Corp. (TSX:EDR) were up 40 cents or 11.87 per cent to $3.77 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.
In other corporate news, shares in Wi-LAN Inc. (TSX:WIN) plunged $1.61 or 32.79 per cent to $3.30 after the technology patent company said a U.S. court in Texas ruled against it in an ongoing patent dispute. The company says a trial jury found that the four patents in a suit against Alcatel-Lucent USA Inc., Ericsson Inc., HTC Corp. and Sony Mobile Communications were found not infringed. Wi-Lan says it is reviewing its options.