Home and garden centre Lowe's has put in a bid for ownership of its currently Canadian-owned competitor, Rona.Galit Rodan/The Globe and Mail
So now hardware stores are "strategic assets" too? Quebec Finance Minister Raymond Bachand actually said that Tuesday when he announced that Premier Jean Charest's government would intervene to prevent a potential hostile takeover of Rona Inc., after the Quebec-based company rejected a $1.76-billion offer by U.S. retailer Lowe's.
Mr. Bachand called Lowe's attempt to acquire Rona "a transaction that serves neither the interests of Quebeckers nor those of Canadians." It is an extreme manifestation of the kind of provincialism that saw Ottawa block BHP Billiton's $39-billion hostile takeover bid for Potash Corp. after pressure from Saskatchewan Premier Brad Wall. Except this isn't the world's largest producer of fertilizer; it is a hardware store chain, and it shouldn't really matter who sells hammers made in China to Canadians.
What, if any, are the "interests" of Quebeckers, or other Canadians, when it comes to a hardware store chain?
It is easy to understand the need for the merits of CNOOC's friendly $15.1-billion (U.S.) takeover of Calgary-based Nexen Inc. to be assessed, and for the application of the "net benefit" test to determine whether foreign takeovers larger than $330-million make a useful contribution to Canada's economy. Oil has a strategic value. Bathroom tiles do not.
And what of the "interests" of the investors? Isn't it the investors in Rona who should decide if and when to sell their shares, and to whom? There are also the broader interests of the market and the view that such a consolidation makes sense in the crowded Canadian sector. Provincial governments, arguably, are not the ones that should be deciding the future of hardware retailing.
Yet, apparently, it does matter who sells hammers and bathroom tiles to Canadians, at least in Quebec. This despite assurances that the head office would remain in Boucherville, Que., and that no jobs would be lost in the province if the takeover took place.
The timing of a provincial election call has played into the hands of Rona's board, provoking the government to direct Investment Quebec to look, in Mr. Bachand's words, at "all steps to counter this bid" – including creating a fund to "protect Quebec's interests."
Mr. Charest was once attacked by opponents who claimed that his free-market orientation would contaminate Quebec's unique economic model. His government's actions suggest he wants to bury such concerns once and for all.