DBRS Places RONA inc. Under Review with Positive Implications

DBRS Limited (DBRS) has today placed the ratings of RONA inc. (RONA or the Company) Under Review with Positive Implications following the Company’s announcement that it has entered into a definitive agreement under which RONA will be acquired by Lowe’s Companies, Inc. (Lowe’s; please see separate DBRS press release) for a total transaction value of $3.2 billion (the Transaction). The total transaction value comprises Lowe’s offer to acquire RONA’s issued and outstanding common shares for $24 per share in cash as well as its issued and outstanding preferred shares for $20 per share, plus RONA’s outstanding debt.

The Transaction has been approved by RONA’s board of directors and is supported by its management team, but will be subject to customary closing conditions including approval by RONA’s shareholders and regulators. RONA expects the Transaction to close in Q2 2016. Lowe’s has agreed to key commitments for RONA and its stakeholders, including to headquarter its Canadian business in Boucherville, Québec; maintain RONA’s store banners; continue distribution to RONA’s independent dealers; and employ the majority of RONA’s staff.

Rona’s Under Review – Positive Implications status reflects Lowe’s current ratings (A (low) and R-1 (low) as rated by DBRS), the intention to purchase RONA’s outstanding preferred shares and the assumption of RONA’s outstanding senior unsecured debt. As of September 27, 2015, RONA had approximately $313 million of senior unsecured debt outstanding, consisting of $116 million of senior unsecured debentures and $197 million drawn on its revolving credit facility (maximum limit of $700 million). DBRS notes that the Company’s senior unsecured debentures will mature in October 2016.

DBRS will proceed with its review as more information becomes available and aims to resolve the Under Review status by the closing of the Transaction.

Notes:
All figures are in Canadian dollars unless otherwise noted.

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link to the right under Related Research or by contacting us at info@dbrs.com.

This rating is endorsed by DBRS Ratings Limited for use in the European Union.

The applicable methodologies are Rating Companies in the Merchandising Industry, DBRS Recovery Ratings for Non-Investment Grade Corporate Issuers and Preferred Share and Hybrid Criteria for Corporate Issuers, which can be found on our website under Methodologies.