Lowe's Cos. Ltd. never stopped trying. In the 3-1/2 years between its takeover bids for Rona Inc., the American retailer incessantly pursued the Canadian chain and met with management numerous times to stress it still wanted to merge.
The timeline, laid out in a proxy circular for the $3.2-billion takeover, shows a company dogged in its pursuit. Meanwhile, Rona was cautious about what price would be palatable to shareholders, and also acutely aware of the need to get Quebec's large pension fund on board before the deal was announced.
The chase began in the summer of 2012, when Rona disclosed a hostile bid from Lowe's. Soon after, the Quebec government piped up, waving the nationalist flag, and by September the American giant retreated. But everyone knew Rona needed some fixing, so a new management team was brought in and a new board was also installed. The retailer started setting out a new strategy, which included reworking its physical footprint and closing 11 big box stores.
What we now know is that Lowe's kept pushing for a deal during the turnaround. "From early 2013 through the spring of 2015, representatives of Lowe's and Rona met on several occasions to discuss potential business opportunities involving Lowe's Canadian operations and Rona, including potential business combination transactions," the circular noted.
Rona was mostly uninterested, but things started to change in April, 2015, when Rona's chairman met with Lowe's leaders, who made it clear they were interested in a "friendly, board-supported transaction" – in other words, they wouldn't risk a hostile scenario again. Rona's answer: Thanks, but you to need to pay a pretty penny to even get us interested.
They met again last July, when Lowe's stressed it might be willing to pay a lot. In September, Rona held private strategic planning sessions where the offer was discussed, as was the threat that Lowe's posed from expanding into Rona's geographical markets. At this point, financial advisers were brought in, and they agreed to keep talking to the American rival.
Things got serious in mid-December, when the two companies entered into exclusive, confidential talks. A month later, the negotiations had progressed so much that Rona needed to convince the Caisse de dépôt et placement du Québec to back the deal, so someone from legal adviser Norton Rose reached out.
It took three weeks, but the Caisse finally promised to pledge its support. The next day, Rona announced the deal.
What isn't clear from the circular: Why the Caisse came around. However, in February, Michael Sabia, who runs the pension fund, explained that the Caisse came to realize Rona couldn't be a champion all on its own, and that Canadian expansion pushes from both Home Depot and Lowe's would be a problem.
"We would very much have liked to have Rona emerge [from its turnaround effort as] a consolidator," he said. "That was just not going to be in the cards."