INSIDE TODAY
Company rejects $1.76B offer
Quebec wants Rona to stay Canadian as Lowe’s eyes home improvement firm
Quebec has come out swinging against a $1.76-billion bid for Canada’s largest home improvement company by U.s.-based Lowe’s, which is expected to keep up the pressure to buy Rona despite having its offer rejected by the homegrown retailer.
Rona said Tuesday the $14.50 per share proposal from its American rival wouldn’t be in its shareholders’ best interest.
“The board believes that in the best interests of Rona and its stakeholders, the corporation should remain focused on executing its business plan with a view to capturing significant opportunities that it sees for its business,” Rona said.
Quebec’s financial minister also issued a statement saying the deal wasn’t in the province’s or the country’s best interest, given Rona’s importance to the economy.
But Lowe’s apparently is prepared to keep knocking at the Canadian company’s door, issuing a statement that said institutional fund managers controlling about 15 per cent of Rona’s stock have expressed support for the acquisition of the suburban Montreal company.
By some definitions, Lowe’s public stance means it’s prepared to make a hostile takeover bid — one that goes around the board of directors and directly to shareholders, although Lowe’s said it would prefer a friendly deal.
“We are disappointed that Rona’s board of directors has rejected our friendly nonbinding proposal, which is clearly attractive for Rona shareholders,” said Robert Niblock, the chairman, president and chief executive of Lowe’s.
“We believe a combination of Lowe’s and Rona makes enormous business sense. In addition, our proposal includes a number of important commitments to Rona that will benefit key stakeholders, including Rona’s dealerowners, employees, suppliers, customers and local communities and would keep Rona’s headquarters in Boucherville, Quebec.”
The Quebec government said it isn’t in favour of Rona falling into foreign hands. “This transaction does not appear to be in the interests of either Quebec or Canada,” Finance Minister Raymond Bachand said in a statement.
“Rona is a major player in Quebec’s economy, particularly in the manufacturing industry because of its extensive network of suppliers and strong links with many regional players across Canada,” Bachand said.
“It should be noted that almost half of Rona’s purchases are made in Quebec and almost 85 per cent in Canada.
Its retail sales, including franchised, affiliated and other independent stores that make purchases from Rona, total over $6 billion per year.
Purchases from its suppliers amount to more than $2 billion a year in Quebec and more than $3.3 billion in Canada,” Bachand said.
The Quebec government has told provincial investment agency Investissement Quebec to examine ways to counter Lowe’s offer, including, setting up a fund to defend Quebec’s interests. Bachand also said the Quebec government is prepared to work with Rona’s senior management team.
Pension fund manager Caisse de depot et placement du Quebec said it’s following the situation and noted the value the company creates for the pension fund and impor- tance of the economic benefits of Rona’s head office in the province.
“As a significant Rona shareholder, and on the basis of these criteria, the Caisse will follow very closely the evolution of this file as well as the performance of the company,” the Caisse said in a statement.
Headquartered in Mooresville, N.C., Lowe’s is relatively small in Canada — with only about 31 stores. HomeDepot currently has 180 stores across Canada.
By contrast, Rona has more than 30,000 employees operating a network of nearly 800 stores under several banners as well as 14 hardware and construction distribution centres.
Rona said it received the offer on July 8 and told Lowe’s last week that it was rejecting the proposal.
Lowe’s said it actually first approached Rona even earlier, including a previous proposal dated Dec. 15, 2011.
Takeover rumours have circulated before, but Rona only announced the approach from Lowe’s on Tuesday before stock markets had opened.
Rona said Lowe’s offered to acquire all its shares for $14.50 each, more than $2.50 per share above Rona’s closing stock price on Monday.