A Canadian flag flies over Rona Inc. signage displayed at the company's store in Toronto, Ontario, Canada, on Feb. 3, 2016. Lowe's Cos. agreed to buy rival Rona for C$3.2 billion ($2.3 billion) in cash to create one of Canada's biggest home-improvement retailers, almost four years after its earlier takeover proposal got rebuffed. Photographer: Cole Burston/BloombergCole Burston/Bloomberg
What a difference three and a half years make. Back in 2012, American hardware retailer Lowe's made a bid for Quebec-based Rona. Quebec's Liberal government, in the midst of a tough election campaign, saw an opportunity to renovate its image with voters. It pulled out its populist toolkit and declared that it would roadblock the deal.
As this space asked, incredulously: "So now hardware stores are 'strategic assets' too?"
Apparently. In fact, after the Parti Québécois won the election and formed a short-lived minority government, it promised to prevent such deals in future. It said it would bring in a new law making hostile takeovers of Quebec-based companies more difficult, by giving extra voting rights to long-term investors and limiting the powers of buyers after a takeover, including restrictions on asset sales or changes to boards of directors.
This week, Lowe's once again took a run at Rona. But this time, the Quebec government says it has no problem with such a deal.
What's changed? For one thing, this is a friendly takeover, not a hostile one. The Rona board is supportive. So is Rona's largest shareholder, the Caisse de dépôt et placement du Québec pension fund. Lowe's has promised to put its Canadian headquarters in Boucherville, Quebec, and says it will continue to employ the "vast majority" of Rona's current employees.
On Wednesday, Quebec's Economy Minister, Dominique Anglade, said that "it is not in the interest of the government to block the transaction," which is the right answer, not to mention a big shift from 2012. PQ Leader Pierre Karl Péladeau for his part is still playing the populist card, calling on the government to use the Caisse to block the deal, which he says will "impoverish" Quebec.
The thing is, some of Quebec's most successful companies have expanded abroad, and in exactly this way. One of Canada's retail giants, Alimentation Couche-Tard, has a global network of 14,900 convenience stores. Most are not in Canada and joined the company through acquisitions. Just this week, Couche-Tard announced it had completed the purchase of Topaz Energy Group, an Irish retailer with 444 stores. The rest of the world doesn't see gas stations, bodegas or hardware big-boxes as strategic industries. Neither should Canada.