Lowe's to buy Canada counterpart RONA for $2.3B
U.S. home improvement and appliance giant Lowe's Companies (LOW) is buying smaller Canadian counterpart RONA in a $2.3 billion deal, the companies said Wednesday.
Lowe's is expected to pay cash and acquire all issued and outstanding common shares of RONA for $24 in Canadian dollars per share. The deal also calls for Lowe's to pay $20 in Canadian dollars for all of RONA's preferred shares.
The estimated $2.3 billion transaction represents a premium of 104% to RONA's closing share price on Tuesday, and a 38% premium to the Canadian company's 52-week high of $17.36 in Canadian dollars, the firms said.
The deal would create Canada's leading home improvement retailer with 2015 revenues of roughly $5.6 billion in Canadian dollars.
Shares of Mooresville, N.C.-based Lowe's closed down 6.19% at $67.42. RONA shares nearly doubled, closing $97.96% higher at $23.30 in Canadian dollars on the Toronto Stock Exchange.
The transaction was unanimously approved by the boards of both companies. The deal is subject to RONA shareholder approval and customary conditions, including regulator reviews. The acquisition is expected to boost Lowe's earnings in the first year after finalization, the companies said.
Robert Niblock, Lowe's chairman, CEO and president, said he expects the deal to accelerate the company's growth strategy by expanding Lowe's presence in the Canadian market and providing initial entry to Quebec.
"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, Niblock said in a statement issued with the announcement.
Lowe's has committed to keep RONA's operations in Boucherville, Quebec, which will be the headquarters of Lowe's Canadian business, Niblock said. Lowe's also will continue to operate RONA's multiple retail banners and distribution centers.
"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," said RONA Chairman Robert Chevrier.
Founded in 1946, Lowe's reported fiscal year 2014 sales of $56.2 billion. The company said it has more than 1,845 home improvement and hardware stores and roughly 265,000 employees.
RONA, founded in 1939, said it generates annual consolidated sales of $4.1 billion in Canadian dollars. The company operates a network of nearly 500 corporate and independent affiliate dealer stores with approximately 22,000 employees in all.
Follow USA TODAY reporter Kevin McCoy on Twitter: @kmccoynyc.