Lowe's nominates directors after 'constructive' talks with D.E. Shaw

By Liana B. Baker

(Reuters) - Home improvement chain Lowe's Cos Inc (NYSE: LOW) said it has nominated two independent board members and plans to add a third following "constructive" talks with hedge fund D.E. Shaw Group, which has taken an activist stake, sending shares up 3 percent on Friday.

D.E. Shaw has built a stake worth roughly $1 billion in the $84 billion company, according to a source familiar with the matter. Shaw has been concerned about Lowe's operational performance in comparison with peers, the source added.

Lowe's same-store sales growth has lagged Home Depot's (NYSE: HD) for several years as it focuses more on do-it-yourself customers compared to its bigger rival's focus on professional contractors who bill more.

While Lowe's stock jumped 30 percent last year, it underperformed Home Depot's 41 percent rise. Lowe's shares added $3.25 to $104.56 on Friday.

Chief Executive Officer Robert Niblock said Lowe's valued the "constructive discussions" with Shaw. Shaw portfolio manager Quentin Koffey said the two new directors will be "significant assets to the board."

David Batchelder, co-founder of Relational Investors, and Lisa Wardell, CEO of Adtalem Global Education (NYSE: ATGE), will join the board, Lowe's said on Friday.

The retailer will also nominate Brian Rogers, chairman of T. Rowe Price Group (NASDAQ: TROW) and its former chief investment officer, for election to the board.

Batchelder was recommended by D.E. Shaw, while Wardell and Rogers were the company's candidates, a source close to the matter said. Batchelder had served on the board of Home Depot following a proxy fight in 2007 and helped push for a turnaround at the company.

The appointments of Batchelder, who will serve on the board's compensation committee, and Wardell, who will sit on the audit committee, will be effective March 22.

D.E. Shaw, best known as a quantitative hedge fund, started carving out an activist practice last year. Koffey joined the firm from Elliott Management about six months ago and was part of a campaign pushing for changes in EQT Corp's (NYSE: EQT) $6.7 billion to deal to buy Rice Energy Inc (NYSE: RICE).

(Reporting by Liana B. Baker in New York; Additional reporting by Harry Brumpton in New York and Siddharth Cavale and Vibhuti Sharma in Bengaluru; Editing by Sriraj Kalluvila and Jeffrey Benkoe)

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