Rona Rejects Takeover Bid From Lowe's
Rona Inc. has received and rejected a $1.76-billion unsolicited takeover offer from Lowe's Companies, which says it's still interested in buying Canada's largest home-improvement chain.
Based in Boucherville, Que. near Montreal, Rona said Tuesday the $14.50 per share proposal from its American rival wouldn't be in its shareholders' best interest.
"The board believes that in the best interests of Rona and its stakeholders, the corporation should remain focused on executing its business plan with a view to capturing significant opportunities that it sees for its business,'' Rona said in a statement.
But Lowe's apparently is prepared to keep knocking at the Canadian company's door, issuing a statement that says institutional fund managers controlling about 15 per cent of Rona's stock have expressed support for the offer.
By some definitions, Lowe's public stance means it's prepared to make a hostile takeover bid - one that goes around the board of directors and directly to shareholders, although Lowe's says it would prefer a friendly deal.
"We are disappointed that Rona's board of directors has rejected our friendly non-binding proposal, which is clearly attractive for Rona shareholders,'' said Robert Niblock, the chairman, presdient and chief executive of Lowe's.
"We believe a combination of Lowe's and Rona makes enormous business sense. In addition, our proposal includes a number of important commitments to Rona that will benefit key stakeholders, including Rona's dealer-owners, employees, suppliers, customers and local communities and would keep Rona's headquarters in Boucherville, Quebec.''
Headquartered in Mooresville, N.C., Lowe's is relatively small in Canada - with only about 31 stores. Overall, Lowe's has 1,745 stores in North America, mostly in the United States.
The first Canadian Lowe's store was opened in 2007, several years after fellow American retailer Home Depot had a significant presence in Canada. Home Depot currently has 180 stores across Canada.
By contrast, Rona has more than 30,000 employees operating a network of nearly 800 stores under several banners as well as 14 hardware and construction distribution centres.
Rona says it received the offer from nearly a month ago, on July 8 and told Lowe's last week on July 26 that it was rejecting the proposal.
Lowe's says it actually first approached Rona even earlier, including a previous proposal dated Dec. 15, 2011.
Takeover rumours have circulated before but Rona only announced the approach from Lowe's on Tuesday before stock markets opened.
"Ronas board carefully considered Lowe's non-binding proposal,'' Rona said.
"On July 26, 2012, Rona informed Lowe's that Rona's board of Directors and special committee had met on several occasions and had carefully reviewed and considered Lowe's unsolicited expression of interest with its financial and legal advisors, and that the Board of Directors of Rona had unanimously determined that Lowe's proposal is not in the best interests of Rona and its stakeholders. Rona's strategic focus remains to execute on its business plan with a view to capturing the significant opportunities that it sees for the business.''
Rona said Lowe's offered to acquire all its shares for $14.50 each, more than $2.50 per share above Rona's closing stock price on Monday. Rona shares closed Monday at $11.87 on the Toronto Stock Exchange.
(The Canadian Press)