RONA’s share price has dipped sharply this week after North Carolina-based Lowe’s, the world’s second-largest home improvement retailer, said it was pulling its “friendly” offer to acquire RONA for $14.50 a share.
At time of posting, RONA’s share price on the Toronto Stock Exchange was $11.22, more than 22 per cent lower than the heights it reached as recently as July 31, just after Lowe’s offer was made public by both companies.
The $14.50 per share offer, now extinct, looks even better compared with RONA’s 52-week low, last November, of $8.64 a share.
But many industry observers expect Lowe’s withdrawal of its non-hostile approach to the RONA board of directors is not the end of its interest in Canada’s largest home improvement retail chain. A hostile takeover attempt could be next on the horizon, with at least some of RONA’s investors having expressed displeasure at RONA’s decision to spurn the original offer. By withdrawing its offer, Lowe’s may be hoping to increase the percentage of RONA shareholdings that would support the deal.
If that was the strategy, it is stirring things up. To give just one example, portfolio manager Richard Bissett of Bissett Investment Management, a Calgary-based firm, was quoted in today’s National Post with a stern rebuke of RONA’s position to date: “We believe that a strategy which focuses solely on the execution of RONA’s current business plan while excluding all other value creating alternatives (including a potential combination with Lowe’s) isn’t in the best interest of shareholders and is the wrong approach.”