(Reuters) - Canada's Metro Inc (>> Metro, Inc.) said on Wednesday it would sell a major portion of its stake in Alimentation Couche Tard Inc (>> Alimentation Couche Tard Inc) to fund its C$4.5 billion acquisition of pharmacy chain Jean Coutu Group (>> Jean Coutu Group PJC Inc).
The company and its Metro Canada Holdings Inc unit will sell their stake in three separate deals for C$57.17 per share, or about C$1.5 billion ($1.20 billion), Metro said in a statement.
The company, which is the third-biggest food retailer in the country, had agreed to buy Jean Coutu earlier this month, paying what analysts said was a "steep" premium to protect against risks facing the retail sector.
The offer price valued Jean Coutu at 24 times forward earnings when the deal was announced, compared with an industry average of 16, according to Thomson Reuters data.
Metro operates more than 600 food stores across Canada and the Jean Coutu deal will help the company add drugstores in Quebec, New Brunswick and Ontario.
About 11.4 million Couche Tard shares will be sold to dealers led by National Bank Financial and BMO Capital Markets as bookrunners to raise C$650 million, while an equal portion will be sold to the units of Caisse de depot et placements du Quebec, Canada's second biggest pension fund.
Metro also said it would sell about 4.4 million shares back to Couche Tard for about C$250 million.
Shares of Metro have risen 4 percent this year on the Toronto Stock Exchange.
(Reporting by Ahmed Farhatha in Bengaluru; Editing by Anil D'Silva)