TORONTO - Lowe’s Cos Inc, the world’s No. 2 home improvement chain, has offered to buy Rona Inc for $1.8 billion, but the struggling Canadian retailer rejected the bid, saying it is not in best interests of its shareholders.
Rona, Canada’s home-grown answer to Lowe’s and Home Depot Inc, said on Tuesday it had received the $14.50 a share proposal from Lowe’s on Sunday, July 8. The bid represents a 36.7% premium to the stock’s closing price on Friday, July 6.
Lowe’s said in a statement its offer has the support of institutional shareholders representing about 15% of Rona’s outstanding shares.
“We reiterate our proposal to the Rona board,” said Lowe’s Chief Executive Robert Niblock. “We hope . .. Ron a’s board will reconsider and recognize that our proposal represents a very attractive opportunity for all Rona shareholders and the company’s major stakeholders.”
Shares of Rona, with a market value of $1.44 billion, closed at $11.87 on Monday on the Toronto Stock Exchange. The stock has risen 12% in the last three months, partly on hopes that Lowe’s might put in a bid.
Boucherville, Quebec-based Rona has struggled as Lowe’s and Home Depot made inroads into its home turf. Sales at Rona’s established stores, or same-store sales - a key measure for retailers - dropped 7.3% in the year ended Dec. 25, 2011.
Speculation about Lowe’s intentions came front and center in early April when one of the U.S.-based chain’s top executives told Reuters in an interview that Rona was a “very interesting company.”
At the time, Lowe’s Chief Financial Officer Robert Hull said he was open to all options. But Rona promptly cooled the speculation by insisting it was not up for sale.
In response to Lowe’s offer, Rona said in a statement it planned to stay focused on executing on its business plan and capitalizing on opportunities that it sees for its business.
It previously said it would close or split up 23 of its 79 biggest stores and open smaller outlets as it looks to rebound from a sharp decline in sales at established stores, which it has blamed in part on weak consumer confidence.
Scotiabank and BMO Capital Markets are acting as Rona’s financial advisers, with Norton Rose Canada LLP and Davies Ward Phillips & Vineberg acting as its legal advisers.