U.S. home improvement and appliance giant Lowe's announced via PR Newswire Wednesday that it will buy its Canadian counterpart, RONA, for $2.3 billion in cash. The deal comes nearly four years after a similar takeover proposal got rebuffed.
Once the transaction is complete, Lowe's will become the dominant home-improvement chain in Canada. It also marks a sharp contrast to the result of Lowe's attempted $1.8 billion hostile takeover in 2012. At the time, both major political parties in Quebec opposed the company coming under American control despite Lowe's commitments to maintain a Canadian head office in Quebec and to cultivate Canadian suppliers.
Under the terms of the deal, Lowe's will pay cash and acquire all issued and outstanding common shares of RONA for C$24 per share, more than double yesterday's closing price of C$11.77, according to Bloomberg.
Lowe's has also agreed to pay C$20 for all of RONA's preferred shares.
The transaction was approved unanimously by both companies' boards of directors, along with RONA's biggest shareholder, Quebec pension fund Caisse de dépôt et placement du Québec. It is based on compelling strategic rationale for both companies and is expected to boost Lowe's earnings in the first year after finalization.
Lowe's CEO Robert Niblock said that he expects the deal to accelerate the company's growth strategy by expanding its pre-existing Canadian division, as well as allowing for entry into Quebec, which accounts for roughly 25 percent of the Canadian improvement market.
"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, he said.
RONA Chairman Robert Chevrier mirrored Niblock's sentiments, saying that the acquisition will allow RONA to maintain its brand power while leveraging Lowe's global presence, according to USA Today.
"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," he said.
Keeping true to its word from 2012, Lowe's will keep RONA's operations in Quebec, which also serves as the headquarters for Lowe's Canadian business. In addition, it will maintain RONA's multiple retail store banners and continue to employ the vast majority of RONA's current employees and key executives.
