CAD 3.2 BN DEAL - Lowe's to Acquire RONA; Creating Canada's Leading Home Improvement Retailer

Lowe's to Acquire RONA; Creating Canada's Leading Home Improvement Retailer

Transaction valued at C$3.2 billion (US$2.3 billion)

 

- Transaction unanimously approved by both companies' Boards of Directors

 

- Agreement is based on compelling strategic rationale for both companies

 

- Lowe's pledges important commitments to RONA's key Canadian stakeholders

 

- Lowe's to locate its Canadian head office in Boucherville, Quebec; Canadian operations to be headed by Sylvain Prud'homme, President of Lowe's Canada

 

- Acquisition accelerates Lowe's growth strategy in Canada

 

MOORESVILLE, NORTH CAROLINA and BOUCHERVILLE, QUEBEC -- (Marketwired) -- 02/03/16 -- Lowe's Companies, Inc. (NYSE:LOW) ("Lowe's" or the "Company") and RONA inc. (TSX:RON)(TSX:RON.PR.A) ("RONA") announced today 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 transaction value is C$3.2 billion (US$2.3 billion) (the "Transaction"). The offer represents a premium of 104 percent to RONA's closing common share price on February 2, 2016 and a 38 percent premium to RONA's 52-week high of C$17.36. Together, Lowe's Canada and RONA stores will create Canada's leading home improvement retailer with 2015 pro forma revenues from Canadian operations of approximately C$5.6 billion. Excluding transaction and integration costs, we anticipate the Transaction will be accretive to Lowe's earnings in the first year following the close of the acquisition.

 

The Transaction has been unanimously approved by the Boards of Directors of Lowe's and RONA and is supported by the management teams of both companies. The Transaction 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 has received an opinion from Scotia Capital Inc. that the consideration to be received by RONA's common and preferred shareholders pursuant to the Transaction is fair, from a financial p

oint of view.

 

The RONA Board will recommend that RONA shareholders vote in favor of the plan of arrangement at a special meeting of shareholders expected to be held before the end of the first quarter of 2016. Further information regarding the Transaction will be included in RONA's information circular to be mailed to RONA shareholders in advance of the special meeting. The arrangement agreement provides that RONA is subject to customary non-solicitation provisions.

 

"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$45 billion and growing home improvement industry. The strategic rationale of this transaction, for both companies, is very compelling," said Lowe's Chairman, President and CEO Robert A. Niblock.

 

"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," added Niblock. "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's Chairman, Robert Chevrier added, "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 t

o assure a smooth and effective transition.

 

"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," said Prud'homme. "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. We have great respect for RONA's leadership team and RONA's talented employee base and look forward to working together to take our businesses to the next level."

 

Lowe's has identified over C$1 billion of opportunities to further increase revenue and operating profitability in Canada. These include: expanding customer reach and serving a new portion of the market by applying Lowe's expertise in certain product categories, such as appliances; enhancing customer relevance, utilizing Lowe's strengths as a leading omni-channel home improvement company and drawing on its customer experience design capabilities; and driving 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.

 

Lowe's Commitments to RONA Stakeholders in Canada

 

In addition to the attractive premium offered to RONA's shareholders, Lowe's has agreed to key commitments for RONA and its stakeholders. These include:

 

--  to headquarter the Canadian businesses in Boucherville, Quebec;
--  to maintain RONA's multiple retail store banners;
--  to enhance distribution services to independent dealers;
--  for RONA to continue to employ the vast majority of its current
    employees and maintain key executives from RONA's strong leadership
    team;
--  to continue RONA's local and ethical procurement strategy and
    potentially expand relationships both Lowe's and RONA have developed
    with Canadian manufacturers and suppliers; and
--  to continue to support Canadian communities through RONA and Lowe's
    charitable and environmental initiatives.


Lowe's Companies, Inc. Conference Call

 

Lowe's will hold a conference call to discuss the announcement today at 8:00 a.m. EST. The conference call will be available by webcast and can be accessed by visiting Lowe's website at www.Lowes.com/investor, clicking on webcasts, and selecting Lowe's Companies Canada Acquisition Conference Call. Supplemental slides will be available 15 minutes prior to the start of the conference call. A replay of the call will be archived on Lowes.com/investor.

 

RONA inc. Conference Call

 

RONA will hold a conference call to discuss the
announcement today at

10:30 a.m. EST. The conference call will be available by webcast and can be accessed by visiting RONA's website at rona.ca/corporate/investors.

 

News Conference

 

Lowe's and RONA will host a joint news conference at noon today at Le Centre Sheraton Montreal Room Hemon, 1201 Boulevard Rene-Levesque O, Montreal, QC H3B 2L7. Executives of both companies will be present to answer questions from the news media. An audio webcast of the news conference will be made available during the event by clicking this link and can be accessed following the event by visiting http://www.Lowes.com/investor and rona.ca/corporate/investors.

 

Advisors

 

CIBC World Markets Inc. and RBC Capital Markets are serving as financial advisors to Lowe's in connection with the Transaction. Stikeman Elliott LLP is serving as legal counsel to Lowe's in Canada, and Hunton & Williams LLP is serving as legal counsel to Lowe's in the U.S. Scotia Capital Inc. is serving as exclusive financial advisor to RONA. Norton Rose Fulbright Canada LLP is serving as legal counsel to RONA.

 

About Lowe's Companies, Inc.

 

Lowe's is a FORTUNE(R) 50 home improvement company serving approximately 16 million customers a week in the United States, Canada and Mexico through its stores and online at Lowes.com, Lowes.ca and Lowes.com.mx. With fiscal year 2014 sales of US$56.2 billion, Lowe's has more than 1,845 home improvement and hardware s

tores and 265,000 employees. Founded in 1946 and based in Mooresville, N.C., Lowe's supports the communities it serves through programs that focus on K-12 public education and community improvement projects. For more information, visit Lowes.com.

 

About RONA inc.

 

RONA inc. is a major Canadian retailer and distributor of hardware, building materials and home renovation products. RONA operates a network of close to 500 corporate and independent affiliate dealer stores in a number of complementary formats. With its nine distribution centres, RONA serves its network of stores and several independent dealers operating under other banners, including Ace, for which RONA owns the licensing rights and is the exclusive distributor in Canada. With more than 17,000 employees in corporate stores and more than 5,000 employees in the stores of its independent affiliate dealers, RONA generates annual consolidated sales of C$4.1 billion. For more information, visit RONA.ca.