Lowe's (NYSE:LOW) is accelerating its expansion into Canada and announced plans to acquire Canadian retailer Rona in a deal valued at CA$3.2 billion (US$2.3 billion).
Lowe's will acquire Rona's network of 500 dealer stores and nine distribution centers. Rona also supplies a network of stores under different banners, including Ace.
The U.S. home improvement retailer has identified opportunities to increase revenue and operating profitability in Canada. It plans to expand customer reach in product categories including appliances; leverage existing omnichannel expertise; and leverage supplier relationships and private label capabilities.
Lowe's believes there is potential to double operating profitability in Canada over five years, according to a company statement.
"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 CA$45 billion and growing home improvement industry. The strategic rationale of this transaction, for both companies, is very compelling," said Robert Niblock, Lowe's president and CEO. "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," he said.
Lowe's currently operates 42 stores in Canada, most in Ontario. In July, it announced plans to spend $50 million to open 14 stores, including 12 newly acquired former Target locations and two additional sites. Lowe's will make Rona's offices in Boucherville, Quebec its Canadian headquarters, to be headed by Sylvain Prud'homme as president of Lowe's Canada.
This is Lowe's second attempt to acquire Rona and expand in Canada. The first, in 2012, was rejected.
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