US home improvement giant Lowe's is buying Canadian retail rival Rona in a friendly takeover for C$3.2bn.
The retail firms announced that they have entered into a definitive agreement under which Lowe's is expected to acquire all of the issued and outstanding common shares of Rona for C$24 per share in cash, and all of the issued and outstanding preferred shares of Rona for C$20 per share in cash. The total value of the transaction is C$3.2bn (US$2.3bn).

The offer is more than double the closing price of Rona's shares on Tuesday, February 2 and considerably more than an original offer made by Lowe's in 2012.

The deal has been unanimously approved by the boards of directors of both Lowe's and Rona and is said to be supported by the management teams of both companies.

The deal is expected to proceed by way of a plan of arrangement by which Lowe's would acquire all of the outstanding shares of Rona, subject to RONA common shareholder approval and satisfaction of customary conditions, including the receipt of all necessary regulatory approvals. The Rona Board will recommend that Rona shareholders vote in favour of the plan of arrangement at a special meeting of shareholders expected to be held before the end of the first quarter of 2016.

Lowe's chairman, president and CEO Robert A. Niblock, who spoke at the Global DIY Summit in June, said of the deal: "We are very excited about this transaction as it leverages the strengths of two great companies, positioning us for continued success in Canada's over C$45bn and growing home improvement industry. The strategic rationale of this transaction, for both companies, is very compelling."

He added: :"The transaction is expected to accelerate Lowe's growth strategy by significantly expanding our presence in the Canadian market through the addition of Rona's attractive business and excellent store locations across the country. Importantly, the transaction also provides Lowe's with entry into Quebec, where Rona is the market leader and we have no presence. We have committed to maintaining Rona's operations in Boucherville, where we will headquarter our Canadian businesses, and plan to continue to operate Rona's multiple retail banners and distribution services to independent dealers. With our shared customer-centric values and a steadfast commitment to the Canadian market, we expect to generate significant long-term benefits for shareholders, customers, vendors, employees and the communities we serve."

Rona chairman Robert Chevrier commented: "We believe the time is right to take the next step in the evolution of the Rona family. 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 commitments made by Lowe's to our employees, potential new markets for Canadian manufacturers and product offerings for our independent dealers, this transaction presents the ideal opportunity for the continued growth of our company while delivering an attractive premium for our shareholders."

The Canadian operations will be led by Sylvain Prud'homme, president of Lowe's Canada. The senior management teams of both companies will work to assure a smooth and effective transition.

Mr Prud'homme said: "We are pleased with the solid position we have established in key Canadian markets in recent years and the positive reception from our local customers. We look forward to continuing our commitment to the Canadian market and further enhancing our offering to the customers of both Lowe's and Rona."

Lowe's says it has identified over C$1bn of opportunities to further increase revenue and operating profitability in Canada, including expanding customer reach and serving a new portion of the market by applying Lowe's expertise in certain product categories, such as appliances.

It also plans to enhance customer relevance, utilising Lowe's strengths as an omni-channel home improvement company and drawing on its customer experience design capabilities.

Finally, it aims to drive increased profitability in Canada by leveraging shared supplier relationships and enhanced scale, as well as Lowe's private label capabilities, in addition to eliminating Rona's public company costs. Given these opportunities, Lowe's believes there is potential to double operating profitability in Canada over five years.