Lowes to Acquire Canadian Chain Rona

On Wednesday, home improvement retailer Lowe’s made a $2.3 billion bid for Quebec-based home-improvement chain Rona. The deal comes 4 years after an attempted hostile acquisition that faced opposition from major political parties. Initial indications point to a friendly deal this time around with approval from the Rona board of directors.

“One of the big differences between this and last time is obviously this time we have the unanimous approval and support of the board of directors of Rona as well as the management team” said Robert A. Niblock, Lowe’s chairman, president and chief executive. “We’re in a much better place than we were in 2012.”

Under the terms of the deal Lowes is expected to acquire all of the issued and outstanding common shares of Rona for C$24 per share in cash, and all of the issued and outstanding preferred shares of RONA for C$20 per share in cash. The total transaction value is C$3.2 billion (2.3 billion in US dollars).

"We believe the time is right to take the next step in the evolution of the RONA family. The team at Lowe’s has presented us with an excellent plan that enables our company to maintain its brand power while at the same time leveraging Lowe’s global presence to build upon and expand our reach. With commitments made by Lowe’s to our employees, potential new markets for Canadian manufacturers and product offerings for our independent dealers, this transaction presents the ideal opportunity for the continued growth of our company while delivering an attractive premium for our shareholders,” said RONA’s Chairman, Robert Chevrier.

Lowe’s has identified over C$1 billion of opportunities to further increase revenue and operating profitability in Canada. These include: expanding customer reach and serving a new portion of the market by applying Lowe’s expertise in certain product categories, such as appliances; enhancing customer relevance, utilizing Lowe’s strengths as a leading omni-channel home improvement company and drawing on its customer experience design capabilities; and driving increased profitability in Canada by leveraging shared supplier relationships and enhanced scale, as well as Lowe’s private label capabilities, in addition to eliminating RONA’s public company costs. Given these opportunities, Lowe’s believes there is potential to double operating profitability in Canada over five years.

"The transaction is expected to accelerate Lowe’s growth strategy by significantly expanding our presence in the Canadian market through the addition of RONA’s attractive business and excellent store locations across the country," added Niblock.  "Importantly, the transaction also provides Lowe’s with entry into Quebec, where RONA is the market leader and we have no presence.