Quebec has come out swinging against a $1.76-billion bid for Canada's largest home improvement company by U.S.-based Lowe's, which is expected to keep up the pressure to buy Rona despite having its offer rejected.
Rona said Tuesday it refused Lowe's unsolicited takeover of $14.50 per share because it wasn't in the interest of its shareholders.
The deal would have given Lowe's a much bigger foothold in Canada.
But the overture caught the attention of Quebec's provincial government, which said it is vehemently opposed to the company falling into foreign hands, while powerful pension manager Caisse de depot et placement du Quebec promptly increased its stake in Rona.
"This transaction, in our opinion, is not in the interests of either Quebec or Canada," Quebec Finance Minister Raymond Bachand told a news conference.
Bachand said the government's investment arm, Investissement Quebec, could buy shares in Rona and lead a coalition to counter Lowe's bid, but stopped short of saying his Liberal government would block a sale.
"It's too early to call that one," he said.
Rona has played an strategic role in creating tens of thousands of jobs through store employees, suppliers and manufacturers in the province and in the rest of Canada, including 50,000 in Quebec, he said.
"Rona is a major player in Quebec's economy, particularly in the manufacturing industry because of its extensive network of suppliers and strong links with many regional players."
Tuesday's public disclosure of the offer followed months of rumours that Lowe's had Rona in its sights - rumours that only intensified after Rona announced the closure of a dozen warehouse stores in Canada earlier this year following disappointing results.
Rona said it received the offer on July 8 and told Lowe's last week that it was rejecting the proposal. Lowe's said it actually approached Rona as early as Dec. 15, 2011.
Rona stock rose as high as $14.49 a share Tuesday on the Toronto Stock Exchange but gave up some of the gains later in the session.
The company's stock closed at $13.50, up $1.63 or almost 14 per cent.
The relatively wide gap between Lowe's offer and the market price suggests investors were uncertain that there will be a deal.
"The board believes that, in the best interests of Rona and its stakeholders, the corporation should remain focused on executing its business plan with a view to capturing significant opportunities that it sees," Rona said in a statement.
But Lowe's apparently is prepared to keep knocking at the Canadian company's door. It issued a statement that said institutional fund managers controlling about 15 per cent of Rona's stock have expressed support for the acquisition.
By some definitions, Lowe's public stance means it's ready to make a hostile takeover bid.
"We are disappointed that Rona's board of directors has rejected our friendly non-binding proposal," said Robert Niblock, the chairman, president and chief executive of Lowe's.
Lowe's urged the board to reconsider its position in a statement. It also said it would keep Rona's headquarters in Boucherville, Que.
The Caisse increased its stake in Rona by two percentage points to 14.2 per cent Tuesday.
Headquartered in Mooresville, N.C., Lowe's has only about 31 stores in Canada out of 1,745 stores total in North America.