Lowe’s and RONA: Deal still on?
The unexpected departure of Robert Dutton, CEO of RONA for the last 20 years, has breathed new life into the possibility that Lowe’s will finally get its hands on Canada’s largest home improvement chain. Dutton stepped down on Nov. 9, two months after he and his board of directors fended off a takeover by Lowe’s. Dutton said he had new initiatives in store for the Boucherville, Quebec-based RONA, which put in a poor performance in its last quarter. While revenues held steady, profits fell to $5.1 million, from $47.8 million in the third quarter last year.
Dutton never got a chance to implement his strategic plan. While no reason was given for his sudden exodus, Montreal’s La Presse reported that Dutton resigned because RONA’s board was entertaining a new and better offer from Lowe’s: $15 per share, up from its original $14.50 offer.
Five days after Dutton left, Invesco Canada announced in a brief release that it plans “to requisition a meeting of shareholders of RONA Inc. for the purpose of removing RONA’s current directors and electing new directors in their place.” RONA has already scheduled a shareholders’ meeting in May 2013. Invesco owns about one-tenth of RONA, making it the company’s second largest institutional shareholder.
Although Dutton is gone, RONA’s acting CEO, Dominique Boies, is fighting back. On Dec. 6, he announced a proposal to streamline the company by reviewing all its formats and eliminating “non-core assets.” And in a press conference, Boies said that Lowe’s first acquisition offer to Dutton, made in 2011, was met with a counter offer: RONA could buy Lowe’s Canada instead.
Lowe’s already has 31 stores in Canada, and finding new sites to expand has proven to be difficult. But taking over RONA — a conglomeration of retailers, wholesalers, corporate and franchise stores operating under different banners and formats — will prove to be no cakewalk. RONA’s dealers and affiliated employee unions have already expressed opposition to a merger with Lowe’s. The Quebec government could also block the purchase.