September 29, 2016

What’s the risk of losing a significant number of corporate head offices now located in Quebec?

What should be done about it?

Yvan Allaire and François Dauphin | IGOPP

More than six months after the fact, the sale of Rona to Lowe’s, a U.S. corporation, continues to generate political controversy. Lowe’s’ first attempt to acquire Rona in 2012 turned more or less hostile in nature, sparking a strong reaction from the Quebec government at the time. The government ordered the financial institutions under its control (Investissement Québec) and pressured those under its influence (the Caisse de dépôt et placement and the Fonds de solidarité de la FTQ) to take up a blocking position in Rona’s shareholdings, which was done to keep the head office in Quebec.

At the time, Lowe’s withdrew from the transaction. But negotiations resumed in 2015, to achieve this time around a “friendly” transaction. Rona’s board of directors eventually approved the sale of the company to Lowe’s, without the Quebec government voicing any objections to the gradual disappearance of Rona’s head office.

Whether as a result of a hostile or friendly process, how many large Quebec corporations are vulnerable to a foreign takeover with the consequent loss, sooner or later, of the strategic functions associated with their head offices?

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Opinions expressed in this paper are the authors’ alone.