Home Depot Eyes Pro Market With HD Supply Buy

The $8 billion deal will extend Home Depot's reach into the $55 billion market for maintenance, repair, and operations products.
Matthew HellerNovember 16, 2020

Home Depot said Monday it will acquire HD Supply for about $8 billion in a major move to boost its offerings to professional customers.

HD Supply is a wholesale distributor of electrical, plumbing, janitorial and other supplies that Home Depot sold in 2007 to a consortium of private-equity firms in a leveraged buyout valued at $8.4 billion.

It will pay $56 in cash, a near 25% premium to the stock’s last close, to reunite with HD Supply and extend its reach into the market for maintenance, repair, and operations (MRO) products.

“The MRO customer is highly valued by The Home Depot, and this acquisition will position the company to accelerate sales growth by better serving both existing and new customers in a highly fragmented $55 billion marketplace,” Home Depot CEO Craig Menear said in a news release.

According to The Wall Street Journal, HD Supply competes with FastenalW.W. Grainger, and Home Depot’s own Pro division, which Menear had sought to build up before the pandemic struck.

“With the deal, Home Depot is … betting that the economic toll of the COVID-19 pandemic will force swaths of Americans to look for affordable housing,” Reuters said.

HD Supply has about 44 distribution centers in the U.S. and Canada and booked sales of nearly $6 billion in its latest fiscal year. In August, it sold its construction unit, which accounted for about half of its business, to private equity firm Clayton, Dubilier & Rice for $2.9 billion.

Home Depot built HD Supply in the 2000s through an acquisition spree led by then-Chief Executive Robert Nardelli.

“We’re thrilled that our associates are joining the Home Depot team and that our customers will be able to benefit from a broader product assortment, expanded delivery options, and enhanced services nationally,” HD Supply CEO Joe DeAngelo said.

In trading Monday, HD Supply shares rose 24.6% to $55.82 while Home Depot dipped 0.2% to $276.74.

“With a bolstered sales force and enhanced supply chain, we have no doubt Home Depot will be a more formidable player in the [MRO] market for years to come,” Jefferies analysts said.

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