Posted November 18, 2020

Home Depot to acquire HD Supply Holdings

HD spun off HD Supply in 2007.

The Home Depot has entered into a definitive agreement to acquire HD Supply Holdings Inc. for an all-cash offer of over $8 billion.

The acquisition will mark a return by Home Depot to the maintenance, repair and operations (MRO) products for the multifamily and hospitality end markets. The company originally acquired Maintenance Warehouse in 1997, grew the company through additional acquisitions and rebranded it The Home Depot Supply in 2004. In 2007, The Home Depot Supply and Hughes Supply combined to form HD Supply, and the company went public in 2013.

Earlier this year, HD Supply sold White Cap, its Construction & Industrial--White Cap business, a distributor of specialty concrete and construction products and services in North America serving professional contractors, to an affiliate of Clayton, Dubilier & Rice for a purchase price of $2.9 billion in cash.

"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," said Craig Menear, chairman and CEO of The Home Depot. "HD Supply complements our existing MRO business with a robust product offering and value-added service capabilities, an experienced salesforce that enhances the strong team we have in place, as well as an extensive, MRO-specific distribution network throughout the U.S. and Canada."

"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," said Joe DeAngelo, chairman and CEO, HD Supply. "We are confident that this will position both The Home Depot and HD Supply for continued growth and success in the MRO distribution space."

Under the terms of the merger agreement, a subsidiary of The Home Depot will commence a cash tender offer to purchase all outstanding shares of HD Supply common stock for $56 per share, for a total enterprise value (including net cash) of approximately $8 billion. The closing of the tender offer is subject to customary closing conditions, including regulatory approvals and the tender of a majority of the shares of HD Supply common stock then outstanding (on a fully diluted basis) and is expected to be completed during The Home Depot's fiscal fourth quarter, which ends on January 31, 2021. The transaction is expected to be funded through cash on hand and debt.

"We plan to access the debt capital markets to raise incremental indebtedness in support of this acquisition. We also expect the transaction to be accretive to earnings in fiscal 2021, with potential for significant shareholder value creation over the longer term," said Richard McPhail, executive vice president and CFO.