RONA deal casts Lowe’s in new light: distributor

The management team and board of directors of Canadian-based RONA agreed to sell to Lowe’s for $2.3 billion.

But where does that mega deal leave the independent hardware dealer's stores in Canada, for whom RONA is also the distributor?

According to the official version of events: Lowe’s will to continue to operate RONA's multiple retail banners and distribution services to independent dealers. For the first time, Lowe’s will simultaneously be a competitor and a supply chain partner of the independent dealer.

By U.S. standards, RONA has a complicated home improvement business model. Of its 496 stores, 236 are corporate-owned, and 260 are dealer-owned. It also owns nine distribution centers that serve both groups of stores. Furthermore, in 2014, RONA struck a deal with Ace Hardware, a long-term agreement for master licensing of the Ace brand in Canada.

When contacted by HBSDealer, Ace declined to comment on the Lowe’s–RONA deal.

Lowe’s operates 42 stores in Canada, since it began growing organically in 2007.

 Without mentioning Ace stores by name, Lowe’s says it plans to carry on RONA’s role as supplier to independents. The Mooresville, North Carolina-based home improvement giant emphasized its plan in a list of  “commitments to RONA stakeholders in Canada,” including a commitment “to enhance distribution services to independent dealers.”

Other commitments were to maintain headquarters in Boucherville, Quebec, and to maintain RONA’s multiple retail store banners.

Elaborating on the new relationship between Lowe’s and RONA, Lowe’s president international Richard Maltsbarger described the acquisition as a good fit. The size of the RONA big box stores falls in the 50,000 sq. ft. to 65,000 sq. ft. range. “That’s quite compatible with the operations we have today and most specifically, it works very well for the Canadian consumer,“ he said.

Maltsbarger also embraced the dual role of the RONA distribution network. “RONA’s distribution network is well set up across the entire country to service both the retail channel as well as its dealer owners,” he said. “We continue to believe in the strength of both of those channels as we go into this transaction.”

He added that it's too early to comment on specific details for how the distribution network will be set up in the future.

Maltsbarger also said he expects the deal to boost Lowe’s ability to serve the pro market. “RONA has had a very strong traditional history with the pro customer," he said. The relationship “will strengthen our Canadian business and strengthen our entire enterprise knowledge in that space,” he added.