Lowe's bid for RONA prompts Quebec government response
By Steve Payne
The largest home improvement retailer in Canada, RONA, based in Boucherville, QC, is likely to stay in the news this week in the wake of a takeover offer from the world’s second-largest home improvement retailer, Lowe’s, of Mooresville, NC.
Lowe’s unsolicited, non-hostile $14.50 per share offer, equivalent to a $1.7-billion price tag for the 840-store RONA, dates back to early July. But it was not made public, and confirmed by both companies, until last week. Lowe’s says that 15 per cent of RONA’s institutional shareholders were willing to accept the bid. But RONA’s board rejected the offer, saying it was not in the best interests of the company or its shareholders. RONA’s stock price on the Toronto Stock Exchange, which had closed at $10.61 immediately prior to the offer, closed Friday at $13.89.
RONA is one of the largest retailers in Canada and is a proud Quebec institution. Thus, the Quebec government is now weighing in on the issue. According to its finance minister, Rayond Bachand, last week, a Lowe’s takeover of RONA “does not appear to be in the best interests of Quebec or Canada.” It remains to be seen if the government will intervene financially should Lowe’s decide to continue with a hostile takeover bid, which some observers think is very possible.
Lowe’s certainly has the financial clout to proceed with a more aggressive offer. With more than $50-billion in revenues and some 1,700 stores, Lowe’s is second to Home Depot in the global revenue ranking of home improvement retail chains. But it has just 31 stores in Canada, having arrived here belatedly five years ago, about 15 years after Home Depot crossed the border, and almost a decade after RONA began its own massive expansion out of Quebec, where it had done the bulk of its business since it was founded in Montreal by a group of independent hardware merchants in 1939.