Canadian Contractor

Steve Payne   

RONA takeover not imminent, Lowe's says

Canadian Contractor Business canada

Three weeks ago, the largest Canadian-owned home improvement retail chain, Quebec-based RONA, appeared to be on the verge of being swallowed up by North Carolina-based Lowe’s, the second-largest hardware and building supply chain in the world.

But in a conference call Aug. 20, discussing his company’s second-quarter results, Lowe’s president and CEO Robert Niblock said “an acquisition is not imminent.”

“We are evaluating our options and part of that evaluation…is whether or not we can complete due diligence and ensure a fair price and an adequate return on our investment,” he said.

On July 31, when RONA publicly revealed the earlier approach by Lowe’s (at $14.50 per share), it said that it was rejecting the American offer as not in the best interests of the company. The Quebec government’s finance minister, Raymond Bachand, and later, the premier, Jean Charest, got involved, saying that the deal would not be good for the province or Canada and that the province might have to do everything in its legal power to keep RONA a Quebec “strategic asset.”

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Whether such lofty rhetoric will persuade Lowe’s that the deal will be more trouble than it’s worth, remains to be seen. A bigger issue would seem to be the radically different business models of the two companies. Lowe’s operates only big box stores, 100 per cent owned by the company, while RONA operates, in addition to corporate-owned big boxes similar to Lowe’s, hundreds of stores that are dealer-owned. Any deal by Lowe’s to buy RONA would trigger a lot of speculation as to the future supply lines of those Main Street independents.

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