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Lowe’s wins bidding for Orchard Supply stores

Mooresville-based Lowe’s Inc. said Monday that it was the sole bidder for California-based Orchard Supply Hardware, and it will acquire 72 of the bankrupt retailer’s stores for $205 million.

The move will boost the Lowe’s store count in California, where the home improvement retailer currently operates 110 stores. Orchard Supply will operate as a separate division of Lowe’s, retaining the company’s current management.

Lowe’s will present the acquisition plan to a bankruptcy court judge on Aug. 20 for approval and hopes to complete the acquisition by the end of the month.

“Orchard is a great brand that needs some investment in a refresh process,” Robert Niblock told the Observer. “They were performing well but strapped with too much debt.”

Lowe’s announced its bid for Orchard Supply two months ago. Other interested parties had until last Friday to submit a competing bid. But Lowe’s said Monday that no one else had, and the auction was closed.

The major benefit to Lowe’s, Niblock said, is more stores in California, a market that’s catching the wave of a rising housing market.

“It’s a market that we’re under-penetrated in,” said Niblock. “There are a number of areas in California where it’s difficult to get into with a traditional big-box store.” Local ordinances and high real estate costs make a Lowe’s-sized store a tough proposition for many urban areas in California, he said.

Orchard Supply operates smaller stores than Lowe’s. Its stores average 36,000 square feet, compared with Lowe’s stores at 110,000 square feet. Orchard Supply’s stores are clustered around California’s big cities, including Los Angeles, San Francisco and San Jose.

Home Depot has greater market penetration in California, and analysts have said Lowe’s can close some of the gap by acquiring Orchard Supply.

In total, Orchard Supply operates 91 stores. Lowe’s said it will acquire the 72 that best fit its strategy, and that it plans to open more Orchard Supply stores in the future.

Lowe’s had more than $1 billion worth of cash on hand at the end of its quarter in May, according to securities filings.

Portillo: 704-358-5041; on Twitter @ESPortillo
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