On Tuesday, it was announced that RONA Inc. (TSX:RON) had rejected an unsolicited $1.8 billion takeover bid by U.S.-based Lowe’s Companies, Inc. (NYSE:LOW). Quebec’s provincial government also announced its opposition to the proposal because it did not want RONA, a major employer in Canada, to fall into foreign hands.
RONA is “the largest Canadian distributor and retailer of hardware, home renovation and gardening products.” Lowe’s is a “FORTUNE® 100 company that serves approximately 15 million customers a week at more than 1,745 home improvement stores in the United States, Canada and Mexico” and claims to be the second-largest home improvement retailer in the world.
RONA’s press release said that its board of directors had unanimously determined, after careful consideration of Lowe’s offer, that the bid was “not in the best interests of RONA and its stakeholders.”
Lowe’s responded to the rejection quickly and fairly aggressively. It issued a press release stating that it had decided to make its previously undisclosed offer public so all RONA shareholders could evaluate the proposal for themselves and communicate directly with RONA’s board.
To help sell the proposal to RONA shareholders, Lowe’s rather extensive press release included the original offer to RONA’s Chairman of the Board, separately detailed what it believes would be the economic and commercial benefits if the two companies combined, and made other statements designed to allay other concerns RONA shareholders might have.
Lowe’s pointed that the price it offered represented a significant premium to shareholders who held RONA stock when the proposal became publicly known, and that institutional investors holding approximately 15% of the stock had indicated their support of the proposed deal. Lowe’s also said that RONA would remain a Quebec company headquartered in Quebec, and that Lowe’s was aware of and approved of RONA’s support to communities, and indicated RONA’s and Lowe’s philosophies on this matter were very similar.
The potential strategic and operational advantages to both companies claimed by Lowe’s included benefits that would come from the combination of Lowe’s global reach with RONA local market expertise and relationships, and the value that Lowe’s supplier relationships would bring to RONA.
It remains to be seen whether or not a deal will be consummated, but there appears little doubt that Lowe’s is still in the hunt.