Lowe’s said Wednesday that it plans to acquire a Canadian home improvement company for $2.3 billion, the Mooresville-based retailer’s second attempt to acquire Quebec-based Rona.
The deal will give Lowe’s a network of almost 500 Rona stores, including corporate-owned and affiliated dealer locations, and nine distribution centers. In 2012, Lowe’s bid almost $1.9 billion for Rona, but that offer was rebuffed when Rona said it wasn’t interested in being acquired.
In an interview with the Observer, Lowe’s CEO Robert Niblock said Rona has seen turnover in its leadership and has changed since the first attempt.
“There’s been a complete change in the chairman and CEO of the organization and the board,” said Niblock, who was in Montreal Wednesday to announce the deal. “They’ve really repositioned the company. It’s a different company than we looked at in 2012. ... We liked what we saw from the outside looking in.”
The boards of both companies have approved the deal, and Rona shareholders will vote on the transaction this quarter. Pending regulatory approval, Lowe’s expects to close the deal in the second quarter.
But political opposition in Quebec, a largely French-speaking province, was swift.
Pierre Karl Péladeau, leader of a Quebec nationalist party, registered his displeasure in a stream of tweets. “Selling our companies abroad! Another lost headquarters,” he tweeted in French shortly after the deal was announced. In 2012, Quebec politicians pressured Rona to reject Lowe’s overtures.
At a news conference Wednesday about the deal, Rona chairman Robert Chevrier faced questions about the propriety of selling a Quebec-based company to Americans and whether Quebec residents would still shop there.
“We’re not hearing that too loudly,” said Chevrier. “It doesn’t seem to bother 1 million Quebecers to go shopping at Home Depot,” a reference to the expansion in Canada of Lowe’s main rival.
He also said that it would have been irresponsible to say “I’m not for sale at any price” due to nationalism, and turn away an offer that would net shareholders a 38 percent premium to the stock’s highest price this year.
Lowe’s CFO Bob Hull said the combined company could generate an additional $1 billion in Canadian dollars a year, through a combination of increased revenue and cost savings through combined purchasing and use of Lowe’s private labels. Lowe’s will act to increase sales at Rona locations through steps such as boosting e-commerce and putting major appliances for sale in Rona’s big-box stores.
The combined operation would be based in Boucherville, Quebec, and headed by Sylvain Prud’homme, president of Lowe’s Canada. Lowe’s will keep Rona’s stores under that brand, and said it will “continue to employ the vast majority of its current employees.”
“We believe the time is right to take the next step in the evolution of the Rona family,” said Chevrier. “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.”
Lowe’s stock closed down more than 6 percent Wednesday, at $67.42 a share. Analysts were largely positive on the deal, which Wayne Hood, of BMO Capital Markets, said could improve financial results and sales at both companies.
“We take a positive stance on the acquisition and would use the weakness in Lowe’s stock as a buying opportunity,” Hood wrote in a note to investors.
With annual sales of more than $56.2 billion, Lowe’s is the second-largest home improvement retailer in the U.S. The Rona acquisition allows the company to expand its reach in North America, especially in the province of Quebec, where cultural and language differences make organic growth more difficult.
“They’ve done a great job of customizing their banners and formats” to meet customer demand in Quebec, a largely French-speaking province that makes up about 25 percent of the Canadian market, Niblock said.
Last year, Lowe’s acquired a dozen former Target stores in Canada for $124 million with plans to expand its Lowe’s Canada presence. Niblock said Lowe’s will go forward with those plans and will operate about 70 stores in Canada under its name in the coming years.
This is the third corporate acquisition or divestiture move for Lowe’s in recent years. In 2013, Lowe’s bought California-based Orchard Supply Hardware, a 72-store chain, for $205 million. And last month, Lowe’s announced plans to sell off its stake in a joint venture that operates Masters Home Improvement stores in Australia.
Home Depot hiring 450 in Charlotte
Home Depot is hiring 450 permanent part-time and seasonal workers for Charlotte-area stores and distribution facilities.
Positions include sales, cashiers, operations and online order fulfillment. Nationwide, the Atlanta-based retailer is adding more than 80,000 workers. Interested candidates must apply online at careers.homedepot.com/jobs-in-bloom.
Mooresville-based Lowe’s said in January that it intends to hire 46,000 seasonal employees for the spring and summer.