Lowe's steps it up in Canada with RONA purchase

Lowe's is making major moves in Canada with the $2.3 billion purchase of RONA Inc., a Canadian home improvement retailer and distributor.



Lowe's had previously made an unsolicited bid on the company more than three years ago, but the substantially higher offer this time around was accepted by Rona's board.



"We are very excited about this transaction as it leverages the strengths of two great companies, positioning us for continued success in Canada's over C$45 billion and growing home improvement industry," said Lowe's chairman, president and CEO Robert Niblock. "The strategic rationale of this transaction, for both companies, is very compelling."



“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."



RONA has approximately 500 corporate and independent affiliate stores under its purview, in addition to nine distribution centers.

Lowe’s Canada president Sylvain Prud’homme will oversee the new business in addition to the existing Lowe’s operations in the country.

The Canadian business will be based in Rona's headquarters of Boucherville, Quebec -- moving its current headquarters from Toronto -- and RONA will retain its multiple retail store brands, the majority of its current staff and executive team.

"We believe the time is right to take the next step in the evolution of the RONA family," said RONA chairman Robert Chevrier. "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."



Lowe’s Canada operates approximately 40 Lowe’s locations aside from RONA's network of 500 stores. The move is sure to amplify its position against Home Depot in Canada, which maintains 182 stores in Canada.



The combined company will also have revenues of $5.6 billion in Canadian dollars.



That's in addition to what Lowe's sees as C$1 billion worth of opportunity in the market. This includes: expanding customer reach 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.



Excluding transaction and integration costs, Lowe's anticipate the transaction will be accretive to its earnings in the first year following the close of the acquisition.