For Orchard, the purchase could make a stay in bankruptcy relatively short. The deal with Lowe's was disclosed in a bankruptcy filing Monday, The Wall Street Journal reported.
In the deal, Orchard would be left with about 31 stores out of the current 91 in operation. Lowe's would purchase 60 stores with an option to purchase the rest later, the Journal said.
Lowe's has 110 stores in California where the housing market is in recovery. The retailer would use the purchase to expand in that state, which is the home state for Orchard Supply Hardware.
The deal also designates Lowe's as the stalking horse bidder, which means other investors could top the Lowe's offer.
In a stalking horse arrangement, the opening bidder -- Lowe's in this case -- is often awarded a fee if their bid not ultimately accepted.
Orchard Supply Hardware carries a debt of $230 million. The retailer has secured a $177 million loan from Wells Fargo to continue operations while in bankruptcy, the Journal said.