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If Rona can be a 'strategic' asset, here are 15 more

These are stories Report on Business is following Tuesday, July 31, 2012.

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I'd love to know what the world's investment banks think today of the decision by Quebec's finance minister to deem a hardware store an "important strategic interest," so much so that he's trying to block its takeover.

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To recap, Lowe's Inc. is proposing acquiring Quebec-based Rona Inc. for $14.50 a share, or about $1.8-billion, a price Rona has rejected.

Quebec's Raymond Bachand plans to intervene in the belief that, as one of the country's biggest retailers and distributors, Rona needs to be protected, as though it were a major resource company. How he blocks a takeover isn't clear, but yesterday he raised the possibility of the province spearheading a rival bid.

He seemed so passionate that I thought for a moment he was talking about keeping BeaverTails out of American hands, rather than a home improvement and garden chain.

So along those lines, here are some other suggestions for Mr. Bachand to consider as strategic assets:

1. RIM. Because no one else wants it, with the exception of Fairfax Financial's Prem Watsa.

2. Ryan Gosling. Because, according to Emma Stone in Crazy, Stupid, Love, he looks like he's Photoshopped.

3. Lululemon. Really, Canadian butts have never looked so good.

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4. Baby seals. If you can't hunt 'em, love 'em. And you'd get Brigitte Bardot and Paul McCartney in the bargain.

5. Tony Clement's riding of Parry Sound-Muskoka. There's almost $50-million of federal money in there from the G8 summit, and we'd hate to see the gazebo and toilets fall into foreign hands.

6. Maple Syrup. And butter tarts, too. Just this week, Industry Minister Christian Paradis declared that "Canadian maple syrup is acknowledged as the best in the world." As he doled out $1.7-million for Quebec syrup producers to research new market opportunities.

7. Whoever makes those white cowboy hats in Calgary. They sure looked good on Will and Kate.

8. Canada's triple-A credit rating. Because soon, we'll be the only country left with one.

9. Bank of Canada Governor Mark Carney. That way the Bank of England can't poach him.

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10. The word eh, without or without the question mark. Every idiot who comments on Canada feels the need to throw it into a sentence, so we might as well make it official.

11. Mike Myers. Because they play road hockey in Wayne's World.

12. Beer. It's too late for Molson and Labatt, but not for the little guys.

13. Vancouver's bike lanes, a portal to the Pacific Rim.

14. Stanfield's. What could be more strategic than men's underwear?

15. Nickelback. Actually, on second thought, let someone else have them.

Big shareholder backs Lowe's
Rona Inc.'s second-largest shareholder is backing U.S.-based Lowe's in its quest for the Canadian retailer, The Globe and Mail's Shirley Won reports.

Invesco Canada Ltd., which has a 12-per-cent stake in Rona through several funds, confirmed today it is supporting Lowe's, which says it has the backing of institutional shareholders holding 15 per cent of Rona stock.

"We are supportive of the bid by Lowe's," said Ian Hardacre, a portfolio manager with Invesco Canada.

"We are extremely disappointed in the management team [at Rona], and how they have run the company. There has been an extraordinary misallocation of capital over the last five years."

Fed stands pat
The Federal Reserve took no action today, while nonetheless indicating a slowing recovery.

Investors had been hoping for a fresh round of stimulus, or at least the hint of one, but the Fed held firm, announcing nothing new and repeating that it expects to hold its benchmark federal funds rate near zero through late 2014.

The Federal Open Market Committee, however, the U.S. central bank's policy-setting panel, did paint a grimmer picture.

"Information received since the Federal Open Market Committee met in June suggests that economic activity decelerated somewhat over the first half of this year," the Fed said.

"Growth in employment has been slow in recent months, and the unemployment rate remains elevated. Business fixed investment has continued to advance. Household spending has been rising at a somewhat slower pace than earlier in the year. Despite some further signs of improvement, the housing sector remains depressed."

The language is a shift from June, when the Fed said that "the economy has been expanding moderately."

The central projected that economic growth would be moderate over the coming months and then "pick up very gradually," a bad sign for the U.S. jobs crisis as the unemployment falls "only slowly" toward appropriate levels.

The Fed certainly appears poised to do something, and economists still expect that at some point soon.

"Today's statement indicates that policymakers still feel they have tools that can be effectively employed should the economy weaken further and pledged to implement 'additional accommodation as needed' to ensure growth and employment accelerate," said Dawn Desjardins, assistant chief economist at Royal Bank of Canada.

"For now, conditions have not deteriorated significantly enough for policy makers to take another genie out of the bottle. Rather, the Fed maintained the policy stance articulated on June 20 and will keep low rates in place 'at least through late 2014' while continuing to extend the term of its asset holdings."

Manufacturing in doldrums
Global manufacturing numbers poured in from around the world today, and were disappointing, to say the least.

Purchasing managers indexes from Europe and Asia illustrate how the recession is biting deep in the former, and rippling through to softer demand in the latter.

"The manufacturing slowdown has not ended," warned Kit Juckes, the chief of foreign exchange at Société Générale.

The various indexes showed China's manufacturing sector still expanding, but within a hair of contraction. In Europe, Spain, Italy, France and Britain are all weak, the latter turning in its worst performance since March 2009.

"The nasty shock was Germany, whose manufacturing sector continued to struggle; the sight of an embattled German economy provides everyone with plenty to worry about," said futures dealer Rupert Osborne of IG Index.

Markit Economic Research, which conducts several of the surveys across the globe, noted that Asian manufacturers are in the midst of their second-deepest slump in more than three years.

"Companies reported that conditions were deteriorating at a rate not seen since April 2009 with the sole exception of the downturn seen last November, with lower PMI readings for Japan, Taiwan, Vietnam, South Korea and India," Markit said.

Royal Bank of Canada's manufacturing index from Canada slipped in July to 53.1 from 54.8 a month earlier, signalling growth in that it's still above the 50 mark that separates expansion from contraction but "the pace of growth moderated to its slowest rate since March."

In the United States, the Institute for Supply Management's manufacturing index was basically flat at 49.8, which, according to CIBC World Markets chief economist Avery Shenfeld, "points to sluggish if any growth, but is still above where it typically dives ahead of a recession."

Awaiting the ECB
Germany's Bundesbank has set the stage for a tense European Central Bank meeting, and possible disappointment for the markets.

Remember that last week, ECB chief Mario Draghi sparked a market rally by pledging to do whatever is necessary to save the euro, a hint that the central bank could decide to intervene and buy Spanish and Italian bonds to drive down their bonds.

Investors began looking toward tomorrow's ECB announcement with hopes that it would act.

But the Bundesbank spread the word last week that it's opposed to such a scheme. And today it published in its website an interview with its president, Jens Weidmann.

The timing appears suspect, given that the interview was conducted in late June and made public only today, a day before the ECB decision.

Weidmann said in the interview that the ECB should not go beyond its mandate and that "we are the largest and most important central bank in the Eurosystem and we have a greater say than many other central banks in the Eurosystem."

Take that, Mr. Draghi.

"Despite President Draghi's pledge to do 'whatever it takes to preserve the euro, the ECB appears unlikely to follow up July's interest rate cut with further major policy announcements," said Ben May of Capital Economics.

WestJet plans premium economy
WestJet Airlines Ltd. plans to introduce a new section of premium economy seats featuring more legroom in the first four rows of its planes, The Globe and Mail's Brent Jang reports.

The move will give travellers a seat pitch of 36 inches in the first four rows. Pitch is an industry term that refers to the distance between the back of your seat and the seat in front of you.

WestJet also announced that it posted a second-quarter profit of $42.5-million, or 31 cents a share, up from $25.6-million or 18 cents in the same period of 2011.

Dying with Dignity
I always love how the funeral industry puts things.

Dignity, the largest undertaker in Britain, posted decent results as more people died.

Here's how it put it: "The number of deaths was ahead of the comparable prior period and this has led to a strong performance by funeral operations."

And think about this one: "Client satisfaction remains high."

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