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The not-so-pleasant choices faced by RONA’s preferred shareholders

A Canadian flag flies over Rona Inc. signage displayed at the company's store in Toronto.

Shareholders of RONA gather in Montreal Thursday to vote on the $3.2 billion takeover by Lowe’s.

For common shareholders, the problem seems a no-brainer. There isn’t any real alternative to tendering to the $24 a share offer, a cost that represents a proper premium to the shares’ recent trading price. And the prices are almost $10 higher than the sale the same buyer made about three . 5 years back.

For preferred shareholders – and RONA has 6.9 million outstanding for any face worth of $172.5 million – the situation would also seem clear: tendering isn’t an option given they are on offer $20 a share, or a $5 a share haircut to the original cost.

According to some holders, receiving that low price would set a poor precedent given that there’s a slew of rate-reset prefs which are trading in a substantial discount to their purchase price. If one issuer gets away with such a deal, others follows suit.

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