Quebec Health Minister Gaétan Barrette pleaded innocent this week when he was accused of forcing Jean Coutu Group into the embrace of Quebec-grocery giant Metro. The eponymous pharmacy chain's 90-year-old founder has spent nearly two years fuming mad at the minister for mucking up the business model he spent 50 years perfecting.
Could it be that, like so many of Mr. Barrette's adversaries, Jean Coutu just couldn't take it any more?
"I don't know any businessman," Mr. Barrette said, "who makes a decision based on emotions."
He obviously doesn't know the Coutus. The family pharmacy empire has been a collective labour of love. Mr. Coutu made room in the business for all five of his children – four of whom currently sit on the board of directors – and long hoped the third generation would take over some day.
"I have 92 per cent of the votes and that brings its privileges," Mr. Coutu said in 2002. "My family is my privilege."
Mr. Coutu's voting stake has since climbed to 93.2 per cent and he will personally pocket more than $2.5-billion in cash and Metro stock if the $4.5-billion made-in-Quebec takeover is consummated. The sale would cap the career of one of Canada's most legendary entrepreneurs, one who helped pioneer the concept of the neighbourhood drugstore that sells oodles of discounted general merchandise.
Quebec pharmacists lined up to buy Jean Coutu franchises. And for years, Mr. Coutu was a fixture of the chain's TV ads, with the slogan: "You'll find everything at Jean Coutu – even a friend!" Well, not quite everything. Mr. Coutu was forced by the Order of Quebec pharmacists to stop selling cigarettes in the 1990s, though not before he put up a fight.
Mr. Coutu became an icon in Quebec, always wearing his trademark white pharmacist's smock, as he built the now 418-store chain into one of the country's most successful retail empires. After recovering from a disastrous foray into the U.S. market with the 2004 purchase of the troubled Eckerd chain, Jean Coutu Group retreated to the relative safety of Quebec, with a smattering of stores in largely francophone communities in Ontario and New Brunswick.
In recent years, however, the magic has been fading. Jean Coutu annual meetings used to be joyful (if thrifty) affairs, where the folksy patriarch would parlay his worldly wisdom à la Warren Buffett. This year's meeting seemed more like a vigil. The odd shareholder who spoke up had nothing good to say about the company, which was accused of stagnating.
You could tell it was wearing on Mr. Coutu and his son François Coutu, whom the elder Coutu had appointed chief executive officer in 2002, only to reappoint himself CEO in 2005 to clean up the Eckerd's mess. By late 2007, François was CEO again and has been ever since.
A merger with Metro has been analysts' prescribed solution for the challenges facing Jean Coutu in a long-consolidated North American pharmacy sector, including the incursion of Wal-Mart and Costco onto its turf and Loblaw's 2014 takeover of Shoppers Drug Mart. But the Coutus might have stuck it out if Mr. Barrette hadn't come along.
Nothing or no one seemed to get to them like the heavy-handed Quebec Health Minister. The father-and-son duo even went on prime-time TV in January to denounce the minister's moves, which delivered a double-whammy to Jean Coutu's generic-drug arm by eliminating the ceiling on rebates paid to pharmacists and by allowing Quebec to use public tenders for generic drug purchases. The rebate ceiling has since been re-instated but heavy clouds continue to hang over the generic drug subsidiary, Pro Doc, as the government seeks to slash its prescription drug bill.
The Coutus had hinted more than once that Mr. Barrette's actions could force them into selling the family business. Investors "are ignoring us," François Coutu complained to Quebec's TVA network in the January interview. "And I understand them. No one wants to invest in a company or an industry when there is uncertainty. And that is making us reconsider a whole bunch of things."
The Journal de Montréal reported this week that the final straw for the Coutus was a recent effort by Mr. Barrette to limit Pro Doc's share of generic drugs sold in Jean Coutu stores to 50 per cent from the current 75-per-cent level, in a bid to spur more competition.
"I wouldn't call it a dictatorship, but it's close," Jean Coutu groused at the company's July annual meeting when Mr. Barrette's name came up.
Mr. Barrette has a habit of making people's blood pressure rise. For the Coutus, the best pill for that turned out to be Metro's offer.
Konrad Yakabuski