LOW Lowes Companies Inc

By Austen Hufford 

Lowe's Cos. said it would acquire Canadian home improvement chain Rona Inc. for about 3.2 billion Canadian dollars (US$2.3 billion) in a move to expand its operations in Canada.

Lowe's will pay about C$24 (US$17.15) for each outstanding common share and C$20 for each outstanding preferred share of RONA. The deal may include debt. The price represents a 104% premium over Rona's closing common share price of C$11.77 on Tuesday.

Rona is a Canadian retailer and distributor of hardware, home renovation products and building materials. The company operates a network of close to 500 corporate and independent dealer stores with nine distribution centers throughout Canada.

"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," Rona's Chairman Robert Chevrier said.

Lowe's expanded Canadian operation, which would have had revenue of C$5.6 billion in 2015, will be led by Sylvain Prud'homme, current president of Lowe's Canada.

The deal will add to Lowe's earnings in the first year following its close, the company said. Lowe's said it has identified over C$1 billion of ways to increase revenue and operating profitability in Canada such as by using shared suppliers and expanding areas where Lowe's has experience, such as appliances.

As part of the deal, Lowe's agreed to several stipulations related to keeping jobs and operations in Canada including agreeing to employ the "vast majority" of current employees and to base Lowe's Canadian operations in Boucherville, Quebec.

Recently Lowe's has benefited from higher home values and more people moving into new homes, which both spur spending on home projects.

Write to Austen Hufford at austen.hufford@wsj.com

(END) Dow Jones Newswires

February 03, 2016 07:26 ET (12:26 GMT)

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