August 10, 2012

Quebec’s move to shield Rona from Lowe’s takeover could end badly

Interview with Yvan Allaire | Financial Post

[…] “Yvan Allaire, chairman of the Institute for Governance of Private and Public Organizations, argues that the real rationale for Quebec’s meddling in Rona is to counter the difficulty, under current securities regulations, for the company’s board to reject a hostile takeover attempt. That compares with the United States, where boards have more power under state laws.

“It’s relatively easy in Canada to put a company into play, at which point the end result is likely that it is going to be sold to the hostile bidder or to another third party,” said Max Rogan, a mergers and acquisitions specialist at McCarthy Tétrault in Montreal.

PQ leader Pauline Marois is proposing to change that situation to give Quebec boards more power in a takeover situation. She opposes the Lowe’s takeover. The other main candidate for premier in the election, Coalition Avenir Québec leader François Legault, has come out against both Lowe’s offer for Rona and Bell’s bid for Astral. He says too many of Quebec’s corporate head offices have been lost.

The political intensity surrounding the Rona takeover will die down after the election, said one veteran Toronto analyst. But if either the PQ or the CAQ wins, all bets are off.

Trumping everything is the fact the outlook for the Canadian renovation industry remains depressed. Consumers are saddled with debt, employment growth is slow and inflation is expected to come back at a time wages aren’t dramatically improving.

“Regardless of what the outcome is — Lowe’s versus Rona — the outlook for the industry is bleak,” the Toronto analyst said. “Rona isn’t going to be able to avoid that. It’s too big.”” … Read more