Mid-Market Merger Update

Home Depot and Hughes Supply; Alberto-Culver, Sally Beauty, and Regis Corp.; Lottomatica and De Agostini; Abbott Laboratories, Guidant, Boston Scie...
Stephen TaubJanuary 10, 2006

In the past couple of days, at least three merger deals have been announced in the $3 billion to $4 billion range, and agreement was struck on a contingent basis.

All are strategic deals — that is, they augment or expand upon the acquirer’s existing businesses.

• The Home Depot Inc. will pay $3.47 billion for Hughes Supply Inc., a distributor of construction, repair, and maintenance products. That price tag includes the assumption of $285 million in net debt.

The merger will more than double the size of Home Depot’s supply business. “By acquiring Hughes Supply, a company with a long and established reputation for excellence and service, we continue to execute our growth strategy laid out five years ago to enhance our core retail business, extend our business into adjacent areas and expand into new markets,” said Home Depot chairman, president, and chief executive officer Bob Nardelli, in a press release.

• In a less straightforward transaction, Alberto-Culver Co. announced that it will spin-off its Sally Beauty Co., a marketer of professional beauty supplies, and merge it with Regis Corp., which runs a chain of beauty salons, hair restoration centers, and beauty education.

Alberto-Culver shareholders will receive 0.6 shares of Regis for each Alberto-Culver share, valuing the transaction at a little more than $2.4 billion. Those shareholders will then own about 54.5 percent of the shares in the combined company, as well as their stake in Alberto-Culver. In addition, before the merger is completed, Sally Beauty will borrow $400 million, about $280 million of which will be used to pay a $3-per-share one-time dividend to Alberto-Culver shareholders.

• Lottomatica S.p.A., which operates Italy’s national lottery, and De Agostini S.p.A., a privately held Italian holding company that is Lottomatica’s majority shareholder, announced that they agreed to buy Gtech Holdings Corp., a provider of gaming technology and services, for $35 in cash per share. The total value of the deal is $4.8 billion, including the assumption of net debt.

• Meanwhile, Abbott Laboratories Inc. has agreed to buy Guidant Corp.’s vascular business for $3.8 billion. The transaction is contingent on Guidant’s acceptance of Boston Scientific Corp.’s latest $25 billion offer; Boston Scientific is currently engaged in a bidding war with Johnson & Johnson.