Guest post by Jacob Kojfman (Vancouver Securities Law)
In early July, American home improvement giant Lowe’s Cos. (“Lowe’s”) made an unsolicited bid for its Canadian counterpart Rona Corp. (“Rona”). Rona’s special committee evaluated the bid and rejected it; two of Rona’s largest shareholders have also done the same.
Aside from the usual concern about the “hollowing out” of Canada‘s business landscape, there is a much bigger concern for Canadian companies and their boards. What options does a board really have when faced with a hostile bid?
One of the most commonly used tactics is the shareholders rights plan or “poison pill”. The use of poison pills has received a lot more attention the last few years as they have come in front of the securities commissions with varying results. It seems more often than not, a securities commission will cease trade a pill since a board will run out of other alternatives.
In the United States, a reporting issuer facing a hostile bid seems more likely to be able to keep its poison pill in place. In the instance of Airgas, that board was able to continue its pursuit of its strategic plan. In Canada, there seems to be a bigger concern: Canadian boards are powerless.
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