Posted August 11, 2020

CD&R to combine HD Supply's White Cap business with Construction Supply Group

Deal will create a $4 billion group of over 400 branches nationwide. 

Clayton, Dubilier & Rice announced an agreement with HD Supply Holdings Inc. under which CD&R funds will lead an investment to acquire HD Supply's Construction & Industrial - White Cap business, and combine it with the Construction Supply Group.

Upon the closing of both transactions, CD&R funds will hold a 65 percent ownership interest in the combined company, and the current shareholders of CSG, led by The Sterling Group, will hold a 35 percent interest. The combined transaction, valued at approximately $4 billion, is subject to customary regulatory approvals.

The CD&R-led group will pay $2.9 billion in cash for the White Cap acquisition, which is expected to close in October 2020.

The combination is intended to create a leading North American distributor of a diverse mix of concrete accessories and specialty construction and safety products with more than $4 billion in annual revenue. White Cap operates 270 branches with approximately 5,500 employees and offers more than 400,000 SKUs to 200,000 customers. With 130 branches and approximately 2,000 employees, CSG has a highly complementary footprint to White Cap in terms of product offering and geography, offering more than 60,000 SKUs to 65,000 customers.

"We developed strong confidence in the White Cap management team during our prior ownership of HD Supply, as they successfully managed through the global financial crisis," said Nate Sleeper, CD&R's chief executive officer. "Over the past several years, the CSG team has built a strong new leader in the industry. We are excited to work alongside both teams to capitalize on the many promising value creation opportunities we believe this strategic combination offers."

John Stegeman, White Cap's current CEO, and Alan Sollenberger, White Cap's current president, are expected to lead the new combined business, which will include the White Cap, Home Improvement Solutions and Brafasco businesses, as well as CSG. CD&R operating partner Phil Knisely, former executive vice president and corporate officer of Danaher Corporation, will serve as chairman of the combined company.

"This transformational combination simultaneously increases our product and service offering, capabilities, and diversification and establishes our business as a focused, independent company," said Stegeman. "We are enthusiastic about the opportunity to join forces with the many talented associates and leaders at CSG to enhance our collective ability to serve our customers. Following this transaction, we will be very well positioned to pursue both organic and inorganic growth opportunities aligned with our strategic priorities."

"We are excited about the opportunities this will bring to our employees, customers, and suppliers," said Mitch Williams, chief executive officer of CSG. "We look forward to our new partnership with CD&R and the continued support of The Sterling Group as we continue to seek growth opportunities to better serve our customers."

"We are proud of the business the CSG team has built over the last four years and see this combination as the next step in our vision to build the leading construction supply distributor in North America," said Brian Henry, partner at The Sterling Group.

The acquisition of White Cap is expected to close in October 2020 and is not conditioned on the closing of the acquisition of CSG.

In March, in response to changing conditions caused by the COVID-19 pandemic, HD Supply announced plans to separate its Facilities Maintenance and Construction & Industrial businesses.

"After a detailed evaluation, we determined that a sale of our White Cap business unit to Clayton, Dubilier & Rice is in the best interests of our HD Supply stockholders,” said Joe DeAngelo, HD Supply chairman, president and CEO. "This transaction will enable the HD Supply leadership team to intensify our focus on Facilities Maintenance, while also returning capital to our HD Supply shareholders."

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