US chain Orchard Supply Hardware Stores looks set to be acquired by home improvement rival Lowe's after Orchard filed for Chapter 11 bankruptcy protection on Monday.
Lowe's has offered $205m for around 60 of Orchard's 91 hardware and garden stores and would take on responsibility for almost all debt to Orchard's suppliers.

Lowe's is acting as a "stalking horse bidder" in making its offer, effectively creating an auction for Orchard. Any competitive bid would have to be at least $12m higher to be successful.

Orchard, which was spun off by Sears Holdings in January 2012, operates mostly in California, where Lowe's already has 110 outlets, typically three times larger than Orchard's.

Lowe's chairman and CEO Robert A 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."

If the deal goes through, Orchard would continue to operate as a separate business under its own name and with its own management.

Orchard generated revenue of $657m last year and reported $441m of assets and $480.1m of liabilities.

"The company's substantial debt due, in part, to significant recapitalisation dividends paid to Sears, made it difficult, if not impossible for the company to right itself," the company said.