Lowe's Companies Inc. is the world's second biggest home improvement retailer. The company announced that it has entered into an asset acquisition agreement with Orchard Supply Hardware. The purchase agreement is valued approximately US$205 million in cash plus assumption of debt owed to Orchard's supplier partners.

Upon the completion of the deal, the acquisition will allow Lowe's to expand a new store format. This will also enable it to reach a new customer base in California with the company's addition of metro store locations.

Orchard will operate as a separate standalone business and retaining its brand under the current management team as according to Lowe's plans.

The acquisition is expected to be completed through a court supervised process. Earlier today, Orchard filed a petition for relief under Chapter 11 of the US Bankruptcy Code. The agreement between Lowe's and Orchard will serve as a "stalking-horse bid" in the auction proceedings.