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March 15, 2022

Galen G. Weston sets out on a new vision for Loblaw, far from the bread wagon days of his family’s roots

Galen G. Weston spent the past year on a corporate diet, slimming down holdings in family-controlled grocery, baking and real estate businesses.

On Monday, Mr. Weston bulked up. The chair and president of Loblaw Cos. Ltd. L-T -1.34%decrease paid $845-million for Lifemark Health Group, a cross-Canada chain of more than 300 physiotherapy, massage, chiropractic and mental-health clinics. Loblaw will roll Lifemark into its Shoppers Drug Mart division and its PC Health online platform.

Buying Lifemark from Boston-based Audax Private Equity gives Mr. Weston a national health and wellness business. Audax bought the business six years ago from pharmacy chain CareRx Corp. for $245-million, then expanded through a series of small acquisitions. Audax’s growth strategy included striking an online booking partnership with Shoppers last November – a first date for the marriage announced on Monday.

Mr. Weston is setting out a new vision for his family’s holdings by acquiring Lifemark while at the same time overseeing Weston-controlled Choice Properties REIT’s sale last week of long-held office buildings for $749-million and parent company George Weston Ltd.’s disposal of an even longer-owned baking business last year for $1.6-billion.

The 49-year-old executive is justifiably proud of corporate roots dating back to 1882, when his great grandfather began delivering fresh bread from wagons. However, he’s far from wedded to that heritage.

Looking back, it’s clear that Mr. Weston began putting his stamp on the family’s holdings in 2017, when he became chair and chief executive officer of George Weston. On his watch, the holding company narrowed its focus to two businesses: retailing under the Loblaw banner and real estate, through Choice Properties. The Toronto-based REIT is one of the country’s largest owners of malls and industrial properties.

The drive to streamline operations picked up steam after patriarch W. Galen Weston – the current chair’s father – passed away last April, with the sale of the baking business and family-owned British luxury department store operator Selfridges, sold in December for an estimated $6.9-billion.

Mr. Weston’s guiding philosophy is spelled out on Choice Properties’ website. The first words that appear are: “Creating enduring value for generations.”

Building long-term wealth means doing more than raising money by exiting a low-growth business such as baking, as Mr. Weston did last year. It means pouring that cash back into the business, trying to position retail and real estate operations for a new generation of customers.

Prior to buying Lifemark, Loblaw invested $75-million in telemedicine company Maple Corp. in 2020, and acquired medical records company QHR for $170-million in 2016. The series of acquisitions, and the arrival of a Lifemark executive team that built their business through M&A, show Mr. Weston sees growth potential in health and wellness that doesn’t exist in grocery stores.

Lifemark is the largest domestic player in a fragmented physiotherapy and rehabilitation space; its executives estimate it has about a 7-per-cent share of an $11-billion market. In a report, analyst Patricia Baker at Bank of Nova Scotia said: “This transaction represents an opportunity for Shoppers and Loblaw to participate in growth associated with rolling up a related health care market segment with a higher-margin profile and to address a new market segment.”

Loblaw used CIBC Capital Markets and law firm Borden Ladner Gervais LLP as its advisers, while Lifemark and Audax were advised by M&A investment boutique Harris Williams and law firms Blake, Cassels & Graydon LLP and Kirkland & Ellis LLP.

Where else will Mr. Weston put capital to work? Bulking up on warehouses and apartment buildings is likely in the cards at Choice Properties. As part of last week’s $749-million sale of six buildings in downtown Toronto, Vancouver and Montreal – Allied Properties REIT was the buyer – Choice Properties CEO Rael Diamond made it clear the company was exiting office properties to focus on retail, industrial and a “growing residential platform.”

Share prices at George Weston, Loblaw and Choice Properties are all up sharply over the past year, as Mr. Weston retooled their holdings. It’s no longer the great grandfather’s baking company, but investors have been well-rewarded by his heir’s strategy.

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