Why Rona has (again) slipped through our fingers

Rona is like the Expos or the Nordiques.

When a city loses a great sports team, it can row a long time before bringing it home. Ask anyone who has been struggling for decades for the return of a baseball team to Montreal or hockey to Quebec.

This week, we had proof that it is hardly easier to recover the head office of a Quebec flagship, like that of Rona, which was sold to the American company Lowe’s in 2016.

The opportunity to bring the hardware store home was there. At hand. At ridiculously low prices. But she slipped through our fingers.

We have learned that a consortium of Quebec companies, supported by the Caisse de dépôt et placement du Québec, presented a letter of interest last spring to buy the Canadian operations of Lowe’s, which includes the Rona, Lowe’s, Réno-Dépôt and Dick’s Lumber.

The boss of the Caisse, Charles Emond, is particularly well placed to understand the file, he who was Rona’s investment banker for many years – on behalf of Scotiabank – before tying up his sale to Lowe’s.

But the American company preferred to sell to the New York private investment fund Sycamore for 400 million US (about 530 million CAN), plus a sum deferred depending on the performance of the company. This is called a garage sale. That’s a fraction of the stratospheric C$3.2 billion price Lowe’s paid just six years ago.

It is unfortunate that no one in Quebec has managed to get their hands on such a windfall, especially when we know to what extent head offices play a crucial role in our economy.

For the Superminister of the Economy, Pierre Fitzgibbon, it is only a postponement. He said he was ready to “work with Quebecers” when the new buyer will be “ready to resell” in “five or seven years”.

Alright, but why didn’t you do it immediately? Have we slept on gas?

Let’s go back to understand better.

As early as 2012, Lowe’s wanted to buy Rona to break into the Canadian market and compete there with its great rival Home Depot. But the Charest government had opposed this unsolicited purchase offer.

Lowe’s then chose to open its own stores in Canada and Rona found herself caught between two elephants with unlimited means. The pressure was strong. Four years later, the company therefore accepted Lowe’s considerably improved offer.

The Couillard government gave its blessing, to the great displeasure of Pierre Karl Péladeau, then leader of the Parti Québécois, who brought down the transaction in flames.

This did not prevent the Caisse from agreeing to sell its stake in Rona for approximately 400 million, for which it had paid 200 million two years earlier. For Quebeckers, it was a home run.

But for Lowe’s, it’s become like a pebble in a shoe. The company has never succeeded in raising the profitability of its Canadian operations to a satisfactory level. With its shareholders tapping its feet, Lowe’s had to get rid of its Canadian operations as quickly as possible.

In Quebec, it would have been difficult to find a single buyer strong enough to buy all the activities, especially with the risk of recession in the air.

One would have hoped that the Fund, like a conductor, manages to tie up a transaction with several players. But for Lowe’s, it was easier to just sell out to Sycamore and say, good riddance!

Moral of the story: it’s not easy to bring home our flagships. So, let’s take care of those we have to prevent them from being the target of an acquisition.

In 2019, the Coalition avenir Québec released $1 billion to set up a fund dedicated to maintaining head offices. Politically, the tool looks good. But in practice, the money he has would not block the acquisition of a large company from here.

And anyway, there are limits to going against the market.

The best defense will therefore always be the attack.

In this regard, we are doing quite well.

We focus a lot on our flagships, which are swallowed up by foreign competitors. But when you step back, you realize that, over the past five years, Canadian companies have spent almost twice as much to buy foreign companies as the reverse.

So let’s stay on the lookout. Let’s support our retailers who have recently taken the lead in the world of renovation. It’s our best chance to recover pieces of the chain founded by Rolland and Napoleon. And to ensure that jobs and the entire network of suppliers, here in Quebec, are preserved.