Rona’s board of directors overhauled

Major shareholders back reform drive

Rona is shaking up its board of directors by adding a new chairman and several members from outside Quebec as its moves to avoid a fractious showdown with shareholders at the spring annual meeting.

The Caisse de dépôt et placement du Québec and Invesco Canada have agreed to support the slate of Rona candidates.

The Toronto-based Invesco, which owns about one-tenth of Rona Inc. shares, had called for change after the chain reported dismal financial results last quarter and its longtime chief executive resigned.

Invesco had supported the unsuccessful $1.76-billion takeover attempt launched last year by Lowe’s Companies Inc., the second-largest U.S. home improvement retailer after Home Depot Inc.

Rona’s new chairman is Robert Chevrier, 69, who has held similar posts at other Quebec-based companies, including Richelieu Hardware, a North American company based in the Montreal area that sells to retailers like Rona.

Current chairman Robert Paré will remain on Rona’s board but two other directors are resigning immediately. Ultimately, there will be eight new members on the board, which will be enlarged by two positions to 14 directors.

“The corporation is now at a critical inflection point in its history where it has to refocus on its core competencies to unlock value built over the years for its shareholders, dealers-owners and other stakeholders,” Chevrier said Monday.

He thanked Paré for his efforts and said his inclusion in the revamped board will be of benefit to Rona.

The company announced Monday it has hired a consulting firm to accelerate progress on strategic priorities announced in December. Details of that review will be announced Feb. 21.

Industry observers are eagerly awaiting the results of that process for signs of progress in turning around the struggling Canadian home-improvement retailer.

Derek Dley of Canaccord Genuity said that while the board changes are positive, they don’t really change the overall thesis for Rona.

“It’s a step in the right direction, but you’re still facing a very weak Canadian renovation spending market and in that context there still remains some headwinds for Rona,” he said from Vancouver.

Dley says he believes Rona will replace interim CEO Dominique Boies, who was selected when longtime chief executive Robert Dutton resigned last fall. The analyst also doesn’t think the company will ultimately sell to American rival Lowe’s, whose acquisition bid was thwarted by the old Rona board.

“I think they’re still going to go down the path of pursuing their strategic priorities and looking to turn margins around, focusing on rolling out smaller proximity stores and kind of going that route,” he added.

IA Michael Investment Counsel, manager of ABC Funds, the fourth-largest shareholder, supports Rona’s new board, which it believes will consider options including a sale to Lowe’s or another third-party.

“I think ultimately you’ll have a more intellectually honest board where they will deal with third-party interest as well, which the previous board didn’t even consider,” company president Irwin Michael said in an interview.

He particularly likes the addition of Wesley Voorheis, who has a history of defending the interests of shareholders.

Michael said the agreement of Rona’s major shareholders avoids a “major donnybrook” at the annual meeting by including support from the Caisse on behalf of Quebec Inc. — a term used to describe the major players in Quebec’s business community.

“We’re pleased that everyone sort of sucked it in a little bit.”

The Caisse said it won’t have a specific appointee on the new board but said the changes in the board are an important step in repositioning the company, but noted “much work remains to be done.”

“Rona, as we’ve always said, must move quickly to improve performance,” said spokesman Maxime Chagnon.

Rona said four new directors will join its board immediately, including a former head of TD Bank’s insurance arm and Guy Dufresne, a former CEO of ArcelorMittal Mines, who at 71 exceeds Rona’s previous mandatory retirement age of 70.

Rona said the board has abolished the retirement requirement.

One unidentified new member will be nominated for election by shareholders, while two existing members won’t seek re-election.

The company said it wants to increase the number of board members from outside of Quebec, but it wasn’t immediately clear the size of that shift.