Lowe’s and Target Attempt to Expand in Canada

Lowe’s and Target Attempt to Expand in Canada

Lowe's and Target Attempt to Expand in Canada

Rona Inc (TSE:RON), a home improvement retailer in Canada snubbed Lowe’s Companies, Inc. (NYSE:LOW) $1.76 billion takeover proposal. Lowe’s offered to purchase Rona’s stock for $14.50 per share. The offer was 22 percent higher compared with its $11.87 closing stock price on Monday.

The Canadian-based retailer said it received Lowe’s proposal on July 8. Lowe’s proposal indicated that negotiations were made with Rona’s shareholders, and its objective is to enter a board supported agreement. Rona’s board of directors, along with a special committee of independent directors and its financial advisers- The Bank of Nova Scotia (NYSE:BNS) (TSE:BNS) and BMO Capital Markets (TSE:BMO), evaluated the proposal. According to Rona, Lowe’s unsolicited bid was not in the best interest of its shareholders.

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In a statement, the company said its “strategic focus is to execute its business plan, with a view of capturing significant opportunities it sees for its business.” In addition, Rona said it is important to keep its shareholders and stakeholders informed about the developments related to Lowe’s bid, in order to ensure market transparency. Furthermore, the company requested Lowe’s to stop pursuing its proposal to acquire Rona, because its board rejected it.

On the other hand, Robert Niblock, chairman and chief executive officer of Lowe’s, released a press statement Tuesday expressing disappointment with the decision of Rona’s board of directors, and encouraged them to reconsider the takeover proposal emphasizing the bid was “clearly attractive for Rona shareholders. He said. “We believe a combination of Lowe’s and RONA makes enormous business sense.

Furthermore Niblock said, “bottom line, we believe that our proposal is good for Rona and the communities it serves in Quebec as well as across Canada,and it is also good for consumers.”  In its previous statement, Lowe’s reiterated that it “remains very interested in pursuing” a board supported agreement with Rona. Lowe’s said its bid was supported by Rona’s shareholders representing 15 percent stake in the company’s shares.

In 2007, Lowe’s expanded its business operations in Canada. According to analysts, its decision to acquire Rona will boost its competitiveness against its rivals. The Home Depot, Inc. (NYSE:HD) , which has 180 stores; Target Corp. (NYSE:TGT), which recently received approval from the Canadian government to acquire Zellers, Inc. and scheduled to open its stores in 2013, and Wal-MartStores, Inc. (NYSE:WMT), which has numerous stores and ongoing expansion worth $750 million in Canada.

RONA is the largest distributor and retailer of hardware, renovation, and gardening products in Canada with approximately 700 stores. As of Tuesday (July 31, 12:42 EDT), its stock value is up by 19.21 percent at $14.15 per share.

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