Canada: Lessons From Rona/Lowe's

In a vindication of the Rona board's business judgment, on February 3, 2016, Lowe's agreed to acquire Rona for $24 per share in cash – a 65% premium to Lowe's July 2012 unsolicited $14.50 proposal that was rejected by Rona's board, and a 104% premium to the pre-announcement share price.

Lowe's original proposal did not proceed in part due to the Québec government's concerns about the effect of the transaction on Rona's stakeholders and the Québec economy more generally.

While board entrenchment and excessive governmental protectionism are to be avoided, there are many instances in which the board's long-term business judgment in respect of value and other stakeholder interests, as well as the government's legitimate concern about the economic impact of a transaction, turn out to be warranted. In this case, shareholders are receiving a much higher premium than they would have under the original proposal. Lowe's has also made a number of important commitments, agreeing to continue to employ the vast majority of Rona's current employees and to make Boucherville, Québec the headquarters of the combined businesses' Canadian operations. The Caisse de dépôt et placement du Québec (Caisse), which holds approximately 17% of Rona's shares, has announced its support for the transaction, and has noted that it "believes the transaction will result in equal or superior economic activity generated by the Rona banners in Québec."

This transaction highlights a number of important policy issues and considerations that inform Canadian dealmaking in the current environment:

  • The critical role of the board in assessing what's in the long-term best interests of the corporation and its stakeholders, and the fact that shareholders should carefully consider the views of a well-advised, independent and informed board. We note the success of Canadian Oil Sands' board in convincing shareholders not to tender to the original Suncor hostile bid, paving the way for a higher-priced supported transaction in a very challenging market.
  • The importance of having a well-developed government- and stakeholder-relations plan when considering an acquisition of a strategically important Canadian business. The success of this transaction, as opposed to Lowe's original proposal, will be based in no small part on the support of the board combined with the backing of the Government of Québec and the Caisse, which sends a strong signal that the undertakings Lowe's has agreed to are of benefit to Québec and, by implication, of net benefit to Canada under the Investment Canada Act. We note the success of TPG's acquisition of the Cirque du Soleil, which also had important commitments to Québec and Canada, as well as the stakeholder undertakings negotiated by the Tim Hortons board in agreeing to the Burger King acquisition.
  • The strength of the U.S. dollar relative to the Canadian dollar can drive dealmaking. While the 104% premium Lowe's has agreed to pay for Rona is exceptional, from Lowe's perspective it is a more modest increase, from approximately US$14 to US$17 per share, due to the decline in the Canadian dollar. Other U.S. and foreign acquirors may see additional buying opportunities in Canada in the current climate, particularly in the energy and mining sectors, where depressed commodity prices have adversely affected target valuations.
  • The regulation of defensive tactics and the question of how much time and latitude boards should have in defending against an unsolicited offer. The original proposal from Lowe's informed, in part, the Autorité des marchés financiers (AMF) of Québec's consultation paper on defensive tactics, which was intended to spark debate on the desirability of adopting a "Delaware-style" approach to the regulation of defensive tactics in Canada (discussed in this previous Osler Update ). Under the AMF proposal, securities regulators would effectively get out of the business of regulating defensive tactics (including rights plans), absent cases of abuse, and leave the regulation of defensive tactics to the courts. The success of the Rona board in this case is consistent with the views of those who support giving Canadian boards a greater ability to "just say no." The pending changes to the Canadian takeover bid regime, which are intended to give boards of directors 120 days to respond to a hostile bid if adopted in their current form (discussed in this previous Osler Update), do not go as far as the AMF proposal, but signal a change in the regulatory environment designed to give boards more time to deal with an unsolicited offer.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.