Rona to sell commercial specialty division in $215 million deal

Thu Jun 20, 2013 10:35am EDT

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(Reuters) - Home improvement and hardware store chain Rona Inc (RON.TO) has struck a deal to sell its plumbing, heating, ventilation and air conditioning business to Emco Corp and expects net proceeds of C$215 million, Rona said on Thursday.

Rona, which previously said it was in serious talks with prospective buyers for the unit, is in the midst of a three-year turnaround plan as it struggles with increased competition.

The company said it expects to record a pre-tax loss of about C$125 million in the second quarter related to the sale of its Commercial and Professional Market division.

The division sells plumbing, heating, ventilation and air conditioning systems to commercial and industrial construction customers. The division operates under various banners across Ontario, Quebec and British Columbia, including Noble, Don Park and MPH Supplies.

The deal is subject to regulatory approval. Emco is a wholesaler-distributor of products for the construction industry.

Boucherville, Quebec-based Rona transformed itself from a modest hardware distributor to a national retailer in the 1990s. But it stumbled in recent years as U.S.-based Home Depot Inc (HD.N) and Lowe's Cos Inc (LOW.N), the world's top two home-improvement chains, expanded their presence in Canada.

Earlier this year Rona reshuffled its board and named a new CEO after it came under pressure from investors following its rejection of an unsolicited C$1.8 billion takeover proposal from Lowe's.

Scotiabank acted as financial adviser to Rona in the deal with Emco, while Norton Rose Fulbright acted as its legal adviser.

Rona shares were off 14 Canadian cents at C$10.10 at mid-morning on the Toronto Stock Exchange.

(Reporting by Solarina Ho; Additional reporting by Euan Rocha; Editing by John Wallace)

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