RON.PR.A / RON.PR.B : 32% Conversion To FloatingReset

RONA Inc. has announced:

that holders of its Cumulative 5-Year Rate Reset Series 6 Class A Preferred Shares of RONA (the “Series 6 Shares”) have elected to convert 2,222,137 of the 6,900,000 Series 6 Shares currently outstanding, on a one-for-one basis, into Cumulative Floating Rate Series 7 Class A Preferred Shares of RONA (the “Series 7 Shares”) on March 31, 2016. Consequently, on March 31, 2016, RONA will have 4,677,863 Series 6 Shares and 2,222,137 Series 7 Shares issued and outstanding. The Series 6 Shares will continue to be listed and the Series 7 Shares will be listed and start trading at market open on March 31, 2016 on the Toronto Stock Exchange under the symbols RON.PR.A and RON.PR.B, respectively.

As previously announced, on February 3, 2016, RONA entered into an arrangement agreement (the “Arrangement Agreement”) under which a subsidiary of Lowe’s Companies, Inc. (“Lowe’s”) has agreed to acquire all of the issued and outstanding common shares of RONA at a price of $24.00 per share in cash by way of a statutory plan of arrangement (the “Arrangement”). Under the terms of the Arrangement Agreement, a subsidiary of Lowe’s has also agreed to acquire all of the outstanding Series 6 Shares and any then outstanding Series 7 Shares for $20.00 per share in cash (plus any accrued but unpaid dividends thereon up to, but excluding, the date of the closing of the Arrangement), which represents a premium of approximately 59% to the closing price of the Series 6 Shares on the TSX on February 2, 2016, the day prior to the announcement of the Arrangement. RONA’s board of directors has unanimously approved the Arrangement Agreement and unanimously recommends that the holders of RONA’ common shares, Series 6 Shares and Series 7 Shares vote FOR the Arrangement at the special meeting to be held on March 31, 2016 concerning the Arrangement (the “Meeting”).

Completion of the Arrangement is conditional upon approval of at least 66⅔% of the votes cast by the common shareholders at the Meeting and satisfaction of other customary conditions. Preferred shareholders will vote on the Arrangement as a separate class of securities and their participation in the Arrangement will require the approval of 66⅔% of the votes cast by holders of preferred shares represented in person or by proxy at the Meeting. However, completion of the Arrangement is not conditional on approval by the preferred shareholders and, if the requisite approval of the preferred shareholders is not obtained, the Series 6 Shares and Series 7 Shares will be excluded from the Arrangement and will remain outstanding in accordance with their terms. It is expected that the Arrangement will be completed in the second half of 2016.

A copy of the Arrangement Agreement, the information circular and related documents have been filed with Canadian securities regulators and are available on RONA’s profile at

Assiduous Readers will remember that RON.PR.A will reset to 3.324%, while the FloatingReset issue, RON.PR.B, will pay 3-Month T-Bills + 265bp, reset quarterly. I recommended against conversion.

It will also be remembered that RON.PR.A is the subject of a Plan of Arrangement that is part of the proposed acquisition of RONA by Lowe’s Companies. This has been discussed several times on PrefBlog:

If the acquisition of RON.PR.A by Lowe’s under the plan of arrangement succeeds, then the conversion will become moot.

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