Of this deal Lowe's CEO Robert Niblock said:
"Strategically, the acquisition will provide us with immediate access to Orchard's high density, prime locations in attractive markets in California, where Lowe's is currently underpenetrated, and will enable us to participate more fully in California's economic recovery."
I'm inclined to agree with Niblock. Plus, this move should help Lowe's reach a different type of customer, the type who prefers a more "intimate" experience. I believe that this is one of the reasons why Lowe's plans to have Orchard operate as a separate, standalone business.
Still, I wonder whether this will be enough. Even after this deal, Lowe's will still trail Home Depot in the number of California stores by a meaningful margin.
Investors will be curious as to why Lowe's bid for only a portion of Orchard's stores and not all of them. But I believe it has to do with strategic overlapping. It wouldn't make sense to buy Orchard stores in areas where Lowe's already has a presence.Follow @saintssense This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.