11/11/2013 04:05 EST | Updated 01/23/2014 06:58 EST

Rona buys remaining stake in Montreal area Coupal banner from family operators

MONTREAL - Canadian home renovation retailer Rona Inc. is acquiring the remaining, minority stake in a family run company that operates Materiaux Coupal, a Montreal area store that specializes in lumber and building materials for contractors.

Rona (TSX:RON) is acquiring 49 per cent of Groupe Coupal Inc for an undisclosed price from the Doucet family, which has run the 99-year-old business since 1971. Quebec-based Rona has held a majority stake in Coupal for nearly eight years.

"This transaction is fully in line with the consolidation of our strategic operations, particularly with respect to our offering to professionals in the building and home improvement segment," said Rona CEO Robert Sawyer.

Materiaux Coupal generated nearly $130 million in sales last year and has more than 500 employees.

It operates nine outlets, two plants specializing in structural components and one division with three plants specializing in indoor finishings.

Coupal president Francois Doucet said the transaction was "the next logical step in this partnership."

Doucet, who will remain a "strategic adviser," didn't indicate what prompted the family to sell the remainder of the business.

The deal was announced on the eve of Rona announcing its third-quarter results.

Rona's adjusted profit is expected to increase 11 per cent to 30 cents per share on cost reductions despite a 6.6 per cent drop in revenues, according to analysts polled by Thomson Reuters. The home renovation company is expected to post $1.25 billion in revenues, down from nearly $1.34 billion a year ago.

Despite efforts to reduce costs, Rona continues to face a challenging economy with anemic residential spending that is expected to dip even further next year.

Irene Nattel of RBC Capital Markets expects same-store sales, a key retail measure, will decrease by two per cent to reflect fewer transactions and smaller purchases.

Rona announced in June efforts to generation $70 million in cost savings on top of the $40 million announced in February. About 30 per cent, or $33 million, was to be reinvested.

Rona is the largest Canadian home renovation retailer with a network of more than 530 stores of various sizes and nearly 25,000 employees.

On the Toronto Stock Exchange, its shares closed down 19 cents at $12.01.