Lowe's Companies, Inc. is selling off its entire Canadian retail network to New York-based Sycamore Partners, a private equity firm, for US$400 million cash plus a performance-based deferred consideration.
The Canadian arm of Lowe’s is based in Boucherville, Quebec.
The November 4 announcement said the sale involves 450 corporate and independent affiliate dealer stores under different banners, which include, Lowe's, RONA, Réno-Dépôt and Dick's Lumber.
The transaction is expected to close early in 2023, subject to customary closing conditions and regulatory approvals.
"The sale of our Canadian retail business is an important step toward simplifying the Lowe's business model. While this business represents approximately 7 per cent of our full year 2022 sales outlook, it also represents approximately 60 basis points of dilution on our full year 2022 operating margin outlook," said Marvin R. Ellison, Lowe's chairman, president and CEO in a statement.
Ellis said the company will now concentrate on taking a larger share of the U.S. market, which he noted posted “improved sales trends and strong profit flow-through in the third quarter, as well as our expectations for solid business performance for the remainder of 2022.”
Sycamore Partners plans to establish Lowe's Canada and RONA as a standalone company headquartered in Boucherville, according to Stefan Kaluzny, managing director of Sycamore Partners.
"We look forward to working with the company's management team to build on its 83-year history as a leading Canadian home improvement business,” he said.
In 2020, despite closing 34 retail outlets across Canada, Lowe’s built a $120 million, 1.2-million-square-foot distribution centre near the Calgary International Airport with Highfield Investment Group, which opened in 2021.
Lowe’s has struggled in Canada since it took over Rona in a $3.2-billion transaction in 2016.
In connection with the preparation of the company's financial statements for the third quarter of 2022, Lowe’s Companies expects to record a pre-tax non-cash impairment charge of approximately $2 billion related to its Canadian retail business.
