A vote of confidence for Quebec’s economy
Shortly after news first broke that Quebec-based hardware chain Rona Inc. had agreed to a friendly takeover by U.S. home improvement giant Lowe’s Companies Inc., Pierre Karl Péladeau hit Twitter with his own version of events.
The Quebec government “can and must block” the $3.2-billion deal, the Parti Québécois leader said, arguing that the province’s pension fund manager, the Caisse de dépôt et placement, had a duty to step in.
“This is Couillard’s Quebec: selling our companies to foreign interests,” Péladeau lamented later on social media. “Another head office has been lost after Alcan and Provigo.”
He’s hardly alone in that sentiment. There’s been concern for decades that the province and the Montreal area in particular has been losing valuable head office jobs. But the Caisse, for one, isn’t buying the view that this deal is bad for Quebec. The pension fund, which holds a 17-per-cent equity stake in Rona, announced it will vote its shares in favour of the transaction because it believes Lowe’s “will maintain or increase economic activity under the Rona banners.”
The Quebec government is also on board. Newly named Economy Minister Dominique Anglade said there’s no reason to block the deal because it’s all about maintaining and creating jobs.
Turns out that foreign investment isn’t such a bad thing after all, especially when the investor is willing to pay a 104 per cent premium to Rona’s closing share price on Tuesday. That’s a big vote of confidence in the Quebec economy, which hasn’t exactly been booming.
Consider these undertakings: Lowe’s has agreed to preserve the Rona head office in Boucherville and make it the headquarters for all of Lowe’s operations in Canada. (The U.S. retailer has been doing business in this country since 2007, but had yet to enter the Quebec marketplace).
Existing store banners and brands across Canada will be maintained, the “vast majority” of more than 22,000 employees will be kept on, Rona’s preference for local suppliers will continue and so will its support to Canadian communities through charitable endeavours.
Of course, you can argue these are empty promises made for public consumption and that Lowe’s will soon run its new acquisition any way it wants.
You can also argue that Lowe’s was simply capitalizing on a cheap Canadian dollar to make an opportunistic purchase, taking out one of Quebec Inc.’s jewels in the process.
But you can’t make the claim, as Coalition Avenir Québec leader François Legault tried to make, that “Quebec is becoming a branch plant economy.” That simply doesn’t fly when you look at the record.
For every Rona or Provigo that gets sold, there’s a major international acquisition by some other Quebec company. Convenience store giant Alimentation Couche-Tard has invested big dollars to buy companies in the U.S., Norway and Ireland. Information technology giant CGI Inc. has been on a buying spree for some time, scooping up firms in the U.S. and the U.K.
That’s life in the global economy. If we’re going to suddenly put firewalls around our own companies then we’ve got to expect that others will do the same to theirs.
That’s not to suggest that head offices don’t matter — they clearly do. They create highpaying jobs and support a wide range of economic activities from the legal, financial, marketing and advertising worlds.
But if we want more of them, the answer is not to block the sale of Quebec companies, it’s to encourage the formation of new ones that can become world beaters — companies like Montreal-based Stingray Digital, which has become an international leader in music services with 200 employees based here.
Rona chairman Robert Chevrier noted on Wednesday that the offer from Lowe’s was so attractive and so compelling for Rona shareholders that directors simply couldn’t say no.
Rona had been trying to fend off Lowe’s advances since 2012 and had been largely successful in restructuring its operations and improving performance. Shareholders, however, weren’t buying it.
When Chevrier and chief executive Robert Sawyer saw Lowe’s plans to expand in Ontario through the acquisition of leases from the former Target Canada chain, they saw the writing on the wall.
The home improvement market across Canada was getting tougher and more competitive, just as the economy was slowing down. With three big players, including Home Depot, there was logically room for only two.
Sometimes, it’s best just to take the money.