Lowe's To Buy RONA...But What Exactly Is RONA?

Lowe's Companies, Inc. (NYSE: LOW) announced on Wednesday it has entered into an agreement to acquire all of the issued and outstanding common shares of Canada-based Rona Inc.

Rona is a major Canadian retailer and distributor of hardware, building materials and home renovations products. The company operates around 500 corporate and independent affiliate stores across Canada and generates around C$4.1 billion ($2.95 billion) of annual sales.

Rona's stock trades on the Toronto Stock Exchange under the ticker "RON".

As part of the merger, Lowe's will pay Rona shareholders C$24 per share, a premium of around 104 percent to its closing common share price on February 2, 2016 and a 38 premium to Rona's 52-week high of C$17.36.

Lowe's expects the transaction to be accretive to its earnings in the first year following the close of the acquisition.

Rona's Board of Directors have been advised by bankers at Scotia Bank that the consideration to be received is "fair" from a financial point of view. Accordingly, the company's Board will recommend that shareholders vote in favor of the plan.

"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," said Lowe's Chairman, President and CEO Robert A. 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."