* Deal valued at C$3.2 bln ($2.28 bln)
* Lowe's to pay C$24/shr per common share, C$20 for prefs
* Premium on common shares more than double Tuesday close
* Largest shareholder Caisse says will accept offer
* Lowe's made unsolicited offer more than three years ago
(Adds Breakingviews link)
By Amrutha Gayathri
Feb 3 (Reuters) - U.S. home improvement retailer Lowe's Cos
Inc LOW.N agreed to buy Canada's Rona Inc RON.TO for C$3.2
billion ($2.28 billion), winning over Rona's board with a far
higher offer than an unsolicited bid more than three years ago
that was opposed by the company and Quebec politicians.
The deal will put Lowe's in a stronger position to compete
with Home Depot Inc (N:HD) HD.N in Canada's more-than $30 billion
home improvement market.
Lowe's, which withdrew a C$1.8 billion offer for Rona in
September 2012, said on Wednesday it had made key commitments,
including moving the headquarters of its Canadian business from
Toronto to Rona's home base in the Montreal suburb of
Boucherville, Quebec.
It also said it would retain the vast majority of Rona's
employees, keep the brand and ramp up distribution to
independent dealers, many of whom had opposed the previous deal.
Lowe's previous attempt to take over Rona became a
hot-button issue in Quebec.
Quebec's economic development minister said it would not be
in the interest of the Liberal government to block the new deal,
despite a call from the opposition Parti Québécois to reject it.
Asked on a call with analysts why Lowe's had made a new
offer, Chief Executive Robert Niblock said Rona was "a much
better business today."
After years of disappointing sales, Rona has been closing
unprofitable stores and generally streamlining operations under
Chief Executive Robert Sawyer. Sales at established stores have
risen five quarters in a row.
Lowe's push into Canada comes a year after Target Corp (N:TGT)
TGT.N exited the country after less than two years due to
supply chain and other issues.
The big difference is that Lowe's is buying an established
business, while Target was largely starting from scratch.
CAISSE ACCEPTS
Lowe's, the world's No. 2 home improvement chain, had only
40 of its 1,850 North America stores in Canada as of March. Rona
has about 700 stores.
Home Depot has 182 Canadian stores, its website shows.
Lowe's will pay C$24 per share for Rona's common shares -
more than double the stock's close on Tuesday.
Rona's largest shareholder, Quebec public pension fund
Caisse de dépôt et placement du Québec, said it would accept the
offer. The Caisse holds about 17 percent of Rona, Thomson
Reuters data shows.
BMO Capital Markets analyst Peter Sklar said the deal would
likely win regulatory approval.
Rona's shares were trading as high as $C23.57 on the Toronto
Stock Exchange, their highest since July 2007. Lowe's shares
were down nearly 8 percent at $66.25 on the New York Stock
Exchange.
($1 = 1.4012 Canadian dollars)
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BREAKINGVIEWS-Lowe's makes an offer even Canada can't refuse
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