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Metro supermarket buying majority stake in Quebec bakery Premiere Moisson

MONTREAL - Supermarket chain Metro is buying a majority stake in leading Quebec bakery Premiere Moisson to fuel the family run company's expansion while adding to its own product offering in a competitive market.

The Colpron-Fiset family, which founded the bakery in 1992, will retain 25 per cent of the company and continue to manage its 23 stores and three production plants. The purchase price wasn't disclosed.

"For Metro, it's a strategic partnership because it will help us to differentiate our banners with fresh and quality products," Metro CEO Eric La Fleche said Tuesday at a news conference at Premiere Moisson's Atwater Market bakery.

Montreal-based Metro (TSX:MRU) said the partnership is set to close in a few weeks and will expand a relationship that has grown over more than 20 years. About 20 per cent of Premiere Moisson's $100 million of annual sales are to Metro, including as a baker for some of its private label bread.

Metro plans to help finance the expansion of Premiere Moisson's premium artisan brands throughout Quebec and eventually across Ontario. In addition to crusty baguettes and other bread, Premiere Moisson sells premium cakes and pastries, gluten-free products, deli items and various ready-to-eat dishes.

The partners hope to more than double the number of retail stores by adding bakeries in other parts of the province before focusing on Ontario, where it has one store.

It's a partnership model that Metro used in 2011 to acquire a majority stake in ethnic grocer Adonis, which has begun to add locations in Toronto.

Canada's third-largest supermarket chain is in tough competition with Loblaw (TSX:L), Sobey's (TSX:EMP.A) and Costco, while its discount banners fend off U.S. banners Wal-Mart and Target.

Premiere Moisson president Liliane Colpron said the partnership with Quebec's leading food chain allows the company to make the leap from a family business to one that can reach more customers.

"We needed a strategic partner to accelerate growth," she told reporters, accompanied by her three children who will continue to run the business.

Colpron insisted that Premiere Moisson won't alter its artisan approach using quality local wheat and ingredients.

"We aren't changing a winning formula."

La Fleche said that's part of what attracted Metro to the bakery, adding there will be no change to Premiere Moisson's "winning recipe."

In addition to adding retail stores, the partners will consider other options, including setting up Premiere Moisson kiosks in Metro stores.

The bakery has 22 locations in Greater Montreal and one in Ottawa, and sells its bread in grocery stores in both provinces. Existing agreements selling bread to grocery rivals will continue to be respected.

Premiere Moisson also owns a 50 per cent stake in Les Moulins de Soulanges, a local producer of natural, premium-quality bread flours and other specialty flours adapted to the needs of artisan-style bakeries.

Analyst Irene Nattel of RBC Capital Markets said the partnership makes sense but is relatively small for Metro.

"The real upside in this kind of transaction is less in the direct contribution of acquired stores and more in the value-added it can provide to the existing store offering/customer base," she wrote in a report.

Metro operates a network of almost 600 food stores under several banners including Metro, Metro Plus, Super C and Food Basics, as well as over 250 drugstores. It has annual sales of more than $11 billion and employs more than 65,000 people.

On the Toronto Stock Exchange, Metro's shares were up 37 cents at $66.75 Tuesday afternoon.

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