Lowe's offers to buy Canada's Rona for C$1.8 billion

Wed Aug 1, 2012 11:06am EDT
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By Euan Rocha and Dhanya Skariachan

(Reuters) - Lowe's Cos (LOW.N: Quote), the world's No. 2 home improvement chain, wants to spend C$1.8 billion to buy Canadian competitor Rona Inc RON.TO, but the struggling Canadian retailer publicly rejected the offer on Tuesday and said its own turnaround plan offered a better chance of success.

Rona, Canada's home-grown answer to Lowe's and Home Depot Inc (HD.N: Quote), said the C$14.50 a share proposal was not the best deal for its shareholders. Smarting from years of disappointing sales, it wants to close some of its big box stores and focus on smaller outlets that it says its customers prefer.

At stake is both Rona's long history as an independent company deeply rooted in Quebec, and Lowe's attempt to kickstart its Canadian expansion by acquiring hundreds of stores and a large national distribution network.

Lowe's said its plan has the support of institutional shareholders with about 15 percent of Rona's outstanding shares. Its July 8 proposal represents a 36.7 percent premium to the stock's closing price on Friday, July 6.

North Carolina-based Lowe's sees a deal with Rona as a way to fight Home Depot in Canada, where the domestic economy has been relatively strong, and the housing market never experienced the crash seen in the United States.

Acquiring Rona would also give Lowe's a chance to build up a presence in Rona's home province of Quebec, where the U.S. company has no operations at all.

"We are disappointed that the Rona board said no," Doug Robinson, Lowe's head of international operations and development, told Reuters in an interview. "We really want to take a little bit of time to consider options."


Robert Dutton, president and chief executive officer of Rona Inc. speaks during their annual general meeting in Boucherville, Quebec, May 9, 2012. REUTERS/Christinne Muschi