The Quebec government has vowed to find a way to stave off a takeover bid of home improvement retailer Rona by U.S.-based competitor Lowe鈥檚, which appears intent on expanding its presence north of the border even after its initial offer was rejected.
Rona Inc. turned down a $1.76 billion takeover bid by Lowe鈥檚 on Tuesday, offering $14.50 per share. But Quebec-based Rona said it turned down the unsolicited takeover on the grounds that the deal wouldn鈥檛 be in the best interest of the company鈥檚 shareholders.
"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.
While the deal is on hold for now, the Quebec government weighed in Tuesday to express concerns about a takeover by a foreign company.
"This transaction does not appear to be in the interests of either Quebec or Canada," said Quebec Finance Minister Raymond Bachand.
"Rona is a major player in Quebec's economy, particularly in the manufacturing industry because of its extensive network of suppliers and strong links with many regional players across Canada."
The Quebec government said it has directed Investissement Quebec, the provincial investment agency, to look into ways of countering Lowe鈥檚 offer.
The move came after months of rumours that Lowe鈥檚 wanted to acquire Rona in an effort to grow its presence in the Canadian market.
Rona said it received the offer from Lowe鈥檚 on July 8 and rejected it last week. Lowe鈥檚 says it first approached Rona much earlier, including a proposal on Dec. 15 of last year.
In its own statement issued Tuesday, Lowe鈥檚 hinted it is prepared to keep up its efforts to acquire Rona, even if that means by hostile takeover, saying institutional fund managers that control about 15 per cent of the company鈥檚 stock are in favour of the deal.
鈥淲e 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, president and chief executive of Lowe's.
In a move aimed at countering the competition it faces from another U.S. rival, Home Depot, Rona has recently closed some of its larger stores and set up smaller ones to offer more personalized service.
In the statement, Lowe鈥檚 said it makes 鈥渆normous鈥� business sense for the two companies to merge. The company also vowed to keep Rona鈥檚 headquarters in Boucherville, Que.
Rona stock soared as high as $14.49 a share on the Toronto Stock Exchange Tuesday, but closed at $13.50, still up $1.63 or nearly 14 per cent.
Also on Tuesday, Quebec pension manager Caisse de depot et placement du Quebec increased its stake in Rona to 14.2 per cent, a move aimed at protecting its interests.
"As a significant Rona shareholder, and on the basis of these criteria, the Caisse will follow very closely the evolution of this file as well as the performance of the company," the Caisse said in a statement.
Another Rona Inc. shareholder, investment fund Fonds de solidarite FTQ, released a statement expressing its wish that the company remain under Quebec ownership.
"As a Rona Inc. shareholder, the Fonds de solidarite FTQ supports the Quebec company's board of directors' unanimous decision made public today to reject the unsolicited purchase offer made by U.S.-based Lowe's.鈥�
Rona Inc. has more than 800 stores under various names, as well as 14 hardware and construction distribution centres, and 30,000 employees. In contrast, Lowe鈥檚 has only 31 Canadian stores. Home Depot has 180 stores across Canada.
With files from The Canadian Press
