TORONTO (Reuters) - Rona Inc RON.TO named a new executive chairman and reshuffled its board on Monday as part of a deal with its top shareholders that will help the Canadian hardware retailer and distributor avoid a potentially bruising proxy battle.
The move comes just a few months after Rona, Canada’s top distributor of hardware, home renovation and gardening products, rebuffed an unsolicited C$1.8 billion ($1.81 billion) takeover proposal from U.S.-based Lowe’s Cos Inc (LOW.N).
It could signal a greater willingness to consider a sale of the company, which has performed poorly against Lowe’s and Home Depot Inc (HD.N) on its home turf, analysts said.
“We view today’s announcement as favorable to Rona’s stock,” said Barclays Capital analyst Jim Durran in a note. “The changes could result in more receptive dialogue regarding potential divestitures, or outright sale of the company.”
The board changes are a precursor to bigger changes at the company, Robert Chevrier, the new executive chairman, said in an interview with Reuters.
Chevrier said the company plans to sell certain non-core assets and make some “drastic moves” to address the bleed at its big-box stores.
Rona’s Toronto-listed shares, which have fallen almost 20 percent from a 52-week high of C$14.49, closed more than 3 percent higher at C$11.86 on Monday, following the reshuffle.
Chevrier, the former chairman of distributor Richelieu Hardware RCH.TO, replaces Robert Pare, who remains a board member.
The change is the second step in an overhaul that began late last year when Rona sacked long-time Chief Executive Robert Dutton and said it would sell assets and simplify operations.
Rona has grown rapidly in the last three decades through a series of acquisitions but stumbled in recent years as Home Depot and Lowe‘s, respectively the world’s No. 1 and No. 2 home improvement chains, have stepped up competition in the Canadian market.
Rona, based in Boucherville, Quebec, also named four other new board members on Monday, following an agreement with its two top shareholders; Quebec’s public pension fund manager Caisse de depot et placement du Quebec, and fund manager Invesco Canada.
Invesco had publicly backed Lowe’s bid for Rona, which was withdrawn in September in the face of opposition from Rona’s board, provincial politicians in Quebec and from many of Rona’s independent dealers. Caisse took no public position on the deal except to announce a marginal increase in its Rona shareholding.
In November, Invesco publicly called for the removal of Rona’s board and outlined plans to requisition a shareholder meeting. Invesco, however, had yet to name a slate of nominees for election to Rona’s board.
Rona said both Caisse and Invesco have now agreed to back its slate of nominees at a shareholder meeting in May. The two investors together own almost 27 percent of Rona’s outstanding shares, according to the latest Thomson Reuters data.
Investors grew more vocal about the need for change at Rona, after it reported another set of weak results in November, on the heels of a string of sales declines at established stores.
Rona said on Monday it has also retained the services of a top global management consulting firm to work on its strategic priorities announced in December. At the time, the company said it would sell assets and simplify its operations as part of a back-to-its-roots strategy.
Rona said two of its board members, Alain Michel and Patrick Palerme, have resigned, effective immediately. Two other current directors will not stand for re-election at Rona’s annual shareholder meeting on May 14.
The company said the four new individuals joining its board, effective immediately, are Bernard Dorval, former group head of insurance & global development at TD Bank; Wesley Voorheis, partner at Voorheis & Co LLP; Guy Dufresne, former president of ArcelorMittal Mines Canada; and Barry Gilbertson, principal with Barry Gilbertson Consultancy.
In addition, two other board members, Steven Richardson and another nominee, will be included in the company’s circular for election at Rona’s next annual general meeting of shareholders.
Rona, which is currently being led by interim CEO Dominique Boies, said it expects to be in a position to provide an update on its process to recruit a new CEO before the end of February. The company said the new CEO would also be named to its board of directors on appointment, replacing a current director.
Following the changes, the total number of Rona directors will increase to 14 from 12, and eight of its board members will be new directors, the company said.
($1 = 0.9938 Canadian dollars)
Reporting by Euan Rocha; Editing by Frank McGurty and Leslie Adler