Lowe's will pay C$24 per share in cash for Rona's common shares, more than double the stock's closing on Tuesday. The deal also include a C$20 per share cash payment for Rona's preferred shares.
Lowe's Canada and Rona will create a retailer with 2015 pro-forma revenue of about C$5.6 billion, Lowe's said on Wednesday.
Lowe's said the deal, which will add to its earnings in the first year after the deal closes, would help increase revenue and operating profitability in Canada by more than C$1 billion.
Only 40 of Lowe's 1,850 stores in North America were located in Canada as of March. Rona, on the other hand, has 700 stores across Canada, according to its website.