U.S.-based Lowe's may not have ended its cross-border courtship for Rona Inc. despite abandoning its $1.8-billion bid for the Canadian home improvement chain, industry experts believe.
Quebec-based Rona said Monday it only learned through a news release that its U.S. suitor had withdrawn its unsolicited, non-binding acquisition proposal, adding that it continues to concentrate on its own efforts to rejuvenate the company.
"Our focus is on the implementation of our business plan based on the renewal of our offer to consumers. This focus remains," spokeswoman Valerie Lamarre said.
In addition to improving the shopping experience, Rona wants to improve its financial results after months of weakness.
The U.S. chain's withdrawal will come at a cost to Rona investors, with Rona's shares dropping more than 11 per cent following the announcement that Lowe's is no longer contemplating an offer of $14.50 per share cash.
Rona stock closed down $1.48 to $11.29 in Wednesday trading on the Toronto Stock Exchange. Lowe's Companies Inc. shares slipped 17 cents to US$29.23 in New York.
Meanwhile, analysts say Lowe's may still have designs for Rona, if not by acquisition of the whole chain, then perhaps by adding big box stores as Rona expands the number of smaller, proximity stores.
The U.S. chain's withdrawal comes seven weeks after Rona, the Quebec government and others objected to the U.S. company's overtures, which had begun privately in late 2011 and became public in July.
"Lowe's continues to believe that a combination of Lowe's and Rona makes business sense and would create significant value for all stakeholders," Lowe's said in a statement Monday.
"It is unfortunate that the Rona board of directors did not recognize the important economic and commercial benefits of this proposal for its stakeholders and for Canada," the statement said.
Irene Nattel of RBC Capital Markets said the move by Lowe's gives Rona some breathing room, but isn't necessarily the end of the story. "Given a slowing Canadian housing market and outlook for sluggish consumer spending, we expect Rona's results - notably top line - to remain pressured and we would therefore expect a certain level of shareholder support for a transaction, at an appropriate price," she saod.
Keith Howlett of Desjardins Securities said the "friendly" phase of the takeover process is suspended. "Lowe's will either now proceed with a hostile bid within three months or intensify its competitive actions in the marketplace to facilitate more productive negotiations in two or three years," he said.
