Lowe’s to buy Canadian chain Rona for $2.3 billion

CHARLOTTE, N.C. – Lowe’s said Wednesday it plans to acquire a Canadian home improvement company for $2.3 billion, marking the Charlotte-area retailer’s second attempt to acquire Quebec-based Rona.

The deal will give Lowe’s a network of almost 500 Rona stores, including corporate-owned and affiliated dealer locations, and nine distribution centers. In 2012, Lowe’s bid almost $1.9 billion for Rona, but that offer was rebuffed when Rona said it wasn’t interested in being acquired.

In an interview with the Charlotte Observer, Lowe’s CEO Robert Niblock said Rona has seen turnover in its leadership and has changed since the first attempt.

“There’s been a complete change in the chairman and CEO of the organization and the board,” said Niblock, who was in Montreal Wednesday to announce the deal. “They’ve really repositioned the company. It’s a different company than we looked at in 2012. We liked what we saw from the outside looking in.”

The boards of both companies have unanimously approved the deal, and Rona shareholders will hold a special meeting this quarter to vote on the transaction. Pending regulatory approval, Lowe’s expects to close the deal in the second quarter.

Lowe’s CFO Bob Hull said the combined company could generate an additional $1 billion in Canadian dollars a year, through a combination of increased revenue and cost savings through combined purchasing and use of Lowe’s private labels. Lowe’s will act to increase sales at Rona locations through steps such as boosting e-commerce and putting major appliances for sale in Rona’s big-box stores.

The combined operation would be based in Boucherville, Quebec, and headed by Sylvain Prud’homme, president of Lowe’s Canada. Lowe’s will keep Rona’s stores under that brand, and said it will “continue to employ the vast majority of its current employees.”

“We believe the time is right to take the next step in the evolution of the Rona family,” said Rona chairman Robert Chevrier in a statement. “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 annual sales of more than $56.2 billion, Lowe’s is the second-largest home improvement retailer in the U.S. The Rona acquisition allows the company to expand its reach in North America, especially in the province of Quebec, where cultural and language differences make organic growth more difficult.

“They’ve done a great job of customizing their banners and formats” to meet customer demand in Quebec, a largely French-speaking province that makes up about 25 percent of the Canadian market, Niblock said.

Last year, Lowe’s acquired a dozen former Target stores in Canada for $124 million with plans to expand its Lowe’s Canada presence. Niblock said Lowe’s will go forward with those plans and will operate about 70 stores in Canada under its name in the coming years.

This is the third corporate acquisition or divestiture move for Lowe’s in recent years. In 2013, Lowe’s bought California-based Orchard Supply Hardware, a 72-store chain, for $205 million. And last month, Lowe’s announced plans to sell off its stake in a joint venture that operates Masters Home Improvements stores in Australia.