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Home Depot will buy a former HD delivery unit for a $ 9.1 billion deal

(Bloomberg) – Home Depot Inc. agreed to buy the construction products distributor HD Supply Holdings Inc., merging the home retailer with its former subsidiary more than a decade after the split.

Home Depot will buy all shares for about $ 56 in cash, according to a statement on Monday, which is a premium of about 25% above the closing price of HD Supply on Friday. With 162 million shares outstanding, the offer is valued at nearly $ 9.1 billion. Including net cash, the deal has a value of about $ 8 billion, the companies said.

The acquisition brings together two companies that were previously under one roof and will give Home Depot more exposure to the professional contractor from the business. Like self-renovations, this segment thrives during the pandemic as Americans want to improve the homes they spend more time in.

Shares of HD Supply jumped 24% at 9:39 a.m. in New York and Home Depot rose 1

.2%. HD shipments rose 11 percent after Friday’s close, while Home Depot rose 27 percent during the period.

One of the largest industrial distributors in North America, HD Supply offers everything from bleach to doors and ceramic tiles to about 500,000 customers from 270 branches and 44 distribution centers, according to its annual report.

HD Supply is “good business with solid margins,” said Chuck Grom, an analyst at Gordon Haskett. In recent years, the company has faced insufficient investment, which allows the buyer to improve its business, he said. The link could add up to 33 cents a share to Home Depot’s earnings, Grom added.

The deal added momentum to Home Depot, which along with rival Lowe’s Cos. It was considered a major retailer at the start of the pandemic and remained open even when many stores were closed for months. The transaction with HD Supply, which will be financed with cash and debt, is expected to be completed in the fiscal fourth quarter of Home Depot, which ends on January 31.

Professional sales

Professional customers now account for about 45 percent of Home Depot’s sales, and HD Supply can help it strengthen its leadership position, said Drew Redding, an analyst at Bloomberg Intelligence. “Although HD Supply is exposed to slower growth in commercial end markets, trends in sales among professionals continue to improve and may accelerate in 2021.”

In 2007, Home Depot sold the delivery unit to a group of buying companies – Carlyle Group LP, Bain Capital LLC and Clayton, Dubilier & Rice LLC – in 2007. The deal was initially valued at $ 10.3 billion, including debt, but in the middle of the housing disaster, it was reduced to $ 8.5 billion. The chain then went public in 2013.

Monday’s announcement comes about a week after Bloomberg News reported that Lowe’s had recently turned to HD Supply and that companies were in preliminary talks, citing people familiar with the matter at the time. The report also says it is unclear whether there have been discussions with other suitors. Lowe later said he was not negotiating and had no plans to make a deal.

(Stock Trading Updates in paragraph 4)

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