Mooresville-based Lowes Inc. said Monday it has withdrawn an offer to purchase Canadas largest home improvement retailer, Rona Inc., a deal that would have sharply increased Lowes share of the Canadian market.
Lowes approached Rona about the transaction, which would have valued Rona at about $1.8 billion, in July. Rona turned down the unsolicited proposal, which, at C$14.50 a share, represented a 37 percent premium to Ronas stock price at the time. The offer from Lowes was also opposed by politicians in Quebec, who said they wanted to keep the Boucherville-based company Canadian.
But some analysts said that Lowes might still pursuer Rona. The Canadian retailers stock fell more than 11 percent after Mondays announcement.
We would not be so quick to assume this episode is concluded, wrote Carol Levenson, an analyst with independent bond rating agency Gimme Credit. Further severe share price deterioration prompted by the withdrawal of the Lowes proposal could pressure the RONA board to talk to Lowes after all.
Robert Niblock, Lowes CEO, said during the retailers earnings report last month that Lowes was still considering all of its options to acquire the company, and didnt rule out a hostile bid. Also, Lowes has said it had the support of institutional shareholders who own about 15 percent of Ronas stock.
We are committed to our business in Canada. ... We do not intend to speculate at this point about how we may grow the business in the future, Lowes spokeswoman Julie Yenichek said Monday, via email. She said Lowes is still evaluating its options, including organic growth, to expand in Canada.
Rona operates some 800 stores of varying sizes, many of them franchise and affiliate locations, and the acquisition would have been Lowes largest. Lowes operates about 1,745 stores, only 35 of them in Canada.
Shares of Lowes closed down 17 cents, less than 1 percent, at $29.23 a share on Monday.
On Monday, Lowes executives said via a news release that Ronas board of directors wasnt interested in the deal.
Lowes has repeatedly attempted to engage the Board of Directors of Rona with respect to its proposal in order to conduct confirmatory due diligence and move forward with a friendly, negotiated transaction, said Lowes. It is unfortunate that the RONA Board of Directors did not recognize the important economic and commercial benefits of this proposal for its stakeholders and for Canada.
Rona did not immediately comment.