UPDATE 2-Canada's Rona bows to investor pressure, recasts board

* Move could signal more willingness to consider a sale

* Robert Chevrier replaces Robert Pare as chairman

* Rona names four other new directors

* Rona shares up 2.4 pct on the Toronto Stock Exchange

TORONTO, Jan 21 (Reuters) - Rona Inc named a new executive chairman and reshuffled its board on Monday as part of a deal with its top shareholders that will help the Canadian hardware retailer and distributor avoid a potentially bruising proxy battle.

The move comes just a few months after Rona, still Canada's top distributor and retailer of hardware, home renovation and gardening products, rebuffed an unsolicited C$1.8 billion ($1.81 billion) takeover proposal from U.S.-based Lowe's Cos Inc .

It could signal a greater willingness to consider a sale of the company, which has performed poorly against Lowe's and Home Depot Inc on its home turf, analysts said.

"We view today's announcement as favorable to Rona's stock as it suggests greater support by the board to proactively enhancing shareholder value," Barclays Capital analyst Jim Durran said in a note. "The changes could result in more receptive dialogue regarding potential divestitures, or outright sale of the company."

Rona's Toronto-listed shares, which have fallen almost 20 percent from a 52-week high of C$14.49, were up 2.6 percent at C$11.80 in midday trading.

Responding to growing pressure for shareholders, Rona tapped Robert Chevrier, the former chairman and director of rival distributor Richelieu Hardware, as its executive chairman, effective immediately. He replaces Robert Pare, who remains a board member.

The change is the second stage of an overhaul that began late last year when the company sacked long-time Chief Executive Robert Dutton and said it would sell off certain assets and simplify its operations.

Rona has grown rapidly in the last three decades through a series of acquisitions but stumbled in recent years as Home Depot and Lowe's, respectively the world's No. 1 and No. 2 home improvement chains, have stepped up competition in the Canadian market.

Rona, based in Boucherville, Quebec, named four other new board members on Monday, following an agreement with its two largest shareholders, Caisse de depot et placement du Quebec and Invesco Canada Ltd.

Caisse du depot is Quebec's public pension fund manager. Fund manager Invesco had publicly backed Lowe's bid for Rona, which was withdrawn in September in the face of stiff opposition from Rona's board, provincial politicians in Quebec and from many of Rona's independent dealers. Caisse took no public position on the deal except to announce a marginal increase in its Rona shareholding.

The two investors together own almost 27 percent of Rona's shares, according to the latest Thomson Reuters data.

In November, Invesco publicly called for the removal of Rona's board and outlined plans to requisition a shareholder meeting. Invesco, however, had yet to name a slate of nominees for election to Rona's board.

Rona said both Caisse and Invesco have now agreed to back its slate of nominees at a shareholder meeting in May

BOARD CHANGES

Investors grew more vocal about the need for change after the company reported yet another set of weak quarterly results in November, following a string of sales declines at established stores.

Rona on Monday also said it has retained the services of a leading global management consulting firm to work on its strategic priorities announced in December. At the time, the company said it would sell assets and simplify its operations as part of a back-to-its-roots strategy.

Rona said two of its board members, Alain Michel and Patrick Palerme, have resigned, effective immediately. Two other current directors will not stand for re-election at Rona's annual shareholder meeting on May 14.

The company said the four new individuals joining its board, effective immediately, are Bernard Dorval, former group head of insurance & global development at TD Bank; Wesley Voorheis, partner at Voorheis & Co LLP; Guy Dufresne, former president of ArcelorMittal Mines Canada; and Barry Gilbertson, principal with Barry Gilbertson Consultancy.

In addition, two other board members, Steven Richardson and another nominee, will be included in the company's circular for election at Rona's next annual general meeting of shareholders.

Rona, which is currently being led by interim CEO Dominique Boies, said it expects to be in a position to provide an update on its process to recruit a new CEO before the end of February. The company said the new CEO would also join its board of directors on appointment, replacing a current director.

Following the changes, the total number of Rona directors will increase to 14 from 12, and eight of its board members will be new directors, the company said.