By Colin Kellaher
Home Depot Inc. agreed to buy HD Supply Holdings Inc. for about $8.7 billion, beefing up its ability to distribute industrial products amid the pandemic and reuniting with a unit it sold off in 2007.
HD Supply is a wholesale distributor of electrical, plumbing, janitorial and other supplies. It has about 44 distribution centers in the U.S. and Canada. It booked sales of nearly $6 billion in its latest fiscal year, though it recently sold off a construction unit that accounted for about half its business.
Home Depot, which has gotten a big lift in sales from rising interest in household projects amid the coronavirus pandemic, said it expects the acquisition of HD Supply will accelerate its sales growth and add to earnings starting next fiscal year.
The company in August reported its strongest quarterly sales growth in nearly 20 years and is expected to report another strong gain on Tuesday. The pandemic has fueled do-it-yourself projects and strained supply chains. CEO Craig Menear had sought to build up the company's professional business before coronavirus.
The Atlanta home-improvement giant said it will pay $56 a share in cash for HD Supply, a 25% premium to Friday's closing price of $44.81. Based on roughly 155.6 million shares outstanding, Home Depot is paying about $8.7 billion.
Home Depot said it will fund the acquisition, which it expects to complete by the end of January, with cash on hand and debt. The transaction has a total enterprise value of roughly $8 billion, including HD Supply's net cash, Home Depot said.
Home Depot built HD Supply in the 2000s through an acquisition spree led by Robert Nardelli, a former chief executive. After a CEO change, the company sold the unit in 2007 to Bain Capital, Carlyle Group and Clayton Dubilier Rice in a leveraged buyout worth $8.4 billion.
The trio of private-equity firms took HD Supply public in 2013.
It competes with Fastenal Co., W.W. Grainger Inc. and Home Depot's own Pro division.
HD Supply last year said it planned to separate its facilities-maintenance and its construction and industrial businesses into two publicly traded companies, but it put those plans on hold in March amid chaotic market conditions brought on by the pandemic.
HD Supply in August opted to sell the construction and industrial business, known as White Cap, to Clayton Dubilier for $2.9 billion in cash and to focus on the facilities-maintenance business. That deal closed last month.
Shares of HD Supply jumped 24.2% to $55.77 in early trading Monday. Home Depot shares edged up less than 1%.
Write to Colin Kellaher at firstname.lastname@example.org
(END) Dow Jones Newswires