U.S.- based home improvement retailer Lowe's Companies Inc. (LOW: Quote) on Monday said it formally withdrew its non-binding proposal worth around C$1.8 billion to buy Canadian home improvement and hardware retailer Rona Inc. (RON.TO: Quote).
Lowe's, on July 8, had offered to buy Rona for C$14.50 in cash per share, but was rejected by the Canadian firm noting that the offer was "not in the best interests of Rona and its stakeholders."
In its statement, Lowe's today said it has repeatedly attempted to engage Rona's Board of Directors to conduct confirmatory due diligence and move forward with a friendly, negotiated transaction. However, the Rona Board did not recognize the important economic and commercial benefits of this proposal for its stakeholders and for Canada.
Lowe's added that it continues to believe that a combination with Rona makes business sense and would create significant value for all stakeholders. The company also said it remains committed to the Canadian market and will continue delivering outstanding home improvement products and services.
Lowe's given $14.50 a share offer represented a premium of 36.7 percent to Rona's closing share price on July 6, the last trading day prior to the submission of the proposal, and a premium of 42.4 percent to the average share price for the 20 days ended July 6. The company then had said that its proposal had the backing of institutional shareholders who hold about 15 percent stake in Rona.
Rona's home province Quebec's Finance Minister Raymond Bachand was not in favor of the acquisition proposal, and had said, "This transaction does not appear to be in the interests of either Québec or Canada. 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."
On August 22, in an open letter addressed to Lowe's Chief Executive Robert Niblock, merchants that operate 164 of nearly 400 affiliate or franchise Rona stores, had criticized the proposed takeover saying that Lowe's' business model is incompatible with theirs. Dealers reportedly own about 10 percent of Rona's shares.
Rejecting the offer, Rona in July said that the company expects to remain focused on executing its business plan with a view to capture significant opportunities it sees for its business.
In its second quarter, Rona's attributable net income declined from last year on unusual items, while earnings per share remained stable. Consolidated revenues rose 3.4 percent driven mainly by a 10.5 percent increase in sales in the Commercial and Professional Market Division. Same-store sales for the Rona network as a whole grew 1 percent.
On Friday's trading, Lowe's shares closed at $29.40 in the U.S., up $0.38 or 1.31 percent, while Rona's shares settled at C$12.77 in Canada, down C$0.06 or 0.47 percent.
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by RTT Staff Writer
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