RON.PR.A Holders Scorn $20 Offer; RON.PR.B Commences Trading

RONA Inc. has announced:

that the holders of record of its common shares (the “Common Shareholders”) have approved the statutory plan of arrangement at the special meeting held today pursuant to the arrangement agreement entered into on February 2, 2016 (the “Arrangement”).

The Arrangement was approved by 99,92% of the 75,067,870 votes cast by Common Shareholders at the special meeting representing 70,22% of the total 106,904,501 common shares outstanding as at February 25, 2016, being the record date of the special meeting (the “Record Date”).

“The vote of RONA common shareholders in favor of the transaction with Lowe’s is an important step,” said Robert Chevrier, Chairman of the Board of RONA. “We are now working to obtain approvals from Canadian regulatory authorities, namely the Competition Bureau and Industry Canada. Once all regulatory approvals are obtained, we will be able to complete the Arrangement.”

Holders of record of RONA’s Cumulative 5-Year Rate Reset Series 6 Class A Preferred Shares (the “Preferred Shareholders”) did not approve the Arrangement, with 25.21% of the 2,968,029 votes cast by Preferred Shareholders voting in favor of the Arrangement, which required the approval of 66⅔% of the votes cast by such shareholders. The votes cast by Preferred Shareholders represented 43.01% of the total 6,900,000 Cumulative 5-Year Rate Reset Series 6 Class A Preferred Shares outstanding as at the Record Date.

As previously announced, completion of the Arrangement is not conditional on approval by the Preferred Shareholders and, given that the requisite approval of the Preferred Shareholders was not obtained, RONA’s Cumulative 5-Year Rate Reset Series 6 Class A Preferred Shares and Cumulative Floating Rate Series 7 Class A Preferred Shares (collectively, the “Preferred Shares”) will be excluded from the Arrangement (including, for greater certainty, to remove the rights of the holders to demand repurchase of their Preferred Shares).

The completion of the Arrangement remains subject to the granting of the final order by the Québec Superior Court, the receipt of required regulatory approvals and the satisfaction or waiver of the other customary closing conditions.

Until completion of the Arrangement, RONA’s common shares and the Preferred Shares will continue to be listed for trading on the Toronto Stock Exchange. Following completion of the Arrangement, the Preferred Shares will remain outstanding in accordance with their terms and will continue to be listed for trading on the Toronto Stock Exchange.

Well, I must confess I’m surprised that the preferred shareholders turned down the offer and astonished that the margin of defeat was so wide. I can only suppose that the moronic whimpering about some ludicrous interpretation of “fairness” had a lot of currency among the voters … but I have no wish to rehash all the arguments I have put forward and reviewed with respect to the vote in prior posts:

Vital statistics for the two issues are:

Maturity Type : Limit Maturity
Maturity Date : 2046-03-31
Maturity Price : 19.15
Evaluated at bid price : 19.15
Bid-YTW : 4.39 %
Maturity Type : Limit Maturity
Maturity Date : 2046-03-31
Maturity Price : 12.25
Evaluated at bid price : 12.25
Bid-YTW : 6.36 %

5 Responses to “RON.PR.A Holders Scorn $20 Offer; RON.PR.B Commences Trading”

  1. JP Koning says:

    April fools?

  2. Louisprefs says:

    I am suprised to see this thread so silent… It is in fact as silent as when I need assistance from Rona’s personnel at their stores:)

    Where are the RON.A pref holders unhappy with the proposed deal? You “won” guys! Say something! l

    Today again RON.PR.A traded back at $20.00 as if the offer was still on the table. Unless I missed something, it is no longer on the table such that the figure of $20 should no longer be a reference. Why is Mr. Market not repricing the issue along the price of prefs of similar characteristics (with perhaps a small uplift on account of Lowes’s better credit rating than the old Rona)?

  3. Louisprefs says:

    Disclosure: I don’t hold any RON.PR.A.

    Still, I find what is going on very, very interesting.

    Based upon the above summary of the voting, more than 740,000 pref shares voted in favour of Lowes’ proposal buying them out for CDN $20 per share (that is 25% X 2.968 Million casted votes). That was not enough for the proposal to go through insofar as the prefs are concerned. As a result, these prefs’ life is extended under the same conditions as they were before the offer (except, possibly, for a possible credit rating enhancing once the Lowes deal on the commons will have been completed).

    Still, almost a week after these results, these prefs still trade, as of the time of writing you these, at a bid/ask prices of 20.25 and 20.49 on moderate volume. I have not seen anything suggesting Lowes will increase its prior offer at $20 and which has now expired. Quite to contrary, the official indications (or was that “intox”?) have rather been that the issue will go on with its life as before.

    In such circumstances, I would have expected the 25% (740 000+ shares) to be more than relieved to be able to still sell the prefs at $20 or more on the market after the offer they voted for expired.

    Nope… This is not so. Subject to possible crosses I am not aware of, the total volume which have been traded since the release of the news that the offer had been rejected and that the pref would trade as before has been less than 150k shares.

    Do I have to take it that the holders of some 600k shares changed their mind almost overnight??? Or is it that, suddenly, some big holders are aware of something I am not such as Lowes about to enhance its prior offer on these prefs despite what they said publicly after their offer at $20 was rejected by the majority of the pref holders????

    Please James or anyone else interested by what is going on, what is(are) your theory(ies)?


  4. SafetyinNumbers says:

    I’m surprised too!

    This PM was at the meeting and picked it as one of his top picks afterwards. I don’t agree with his rationale but it’s a theory at least.

  5. fed says:

    I’m glad the precedent was not set. It will be interestng to watch what happens with the outstanding prefs. Will they still be trading on the open market? We wll see.

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