Home Depot Bets on Maintenance, Repair and Operations Products by Reacquiring HD Supply

November 18th, 2020 by Drew Vass, Executive Editor

Officials for The Home Depot announced this week that the company has reached an agreement to reacquire HD Supply Holdings Inc. The move marks the reversal of a decision by the company in 2007 to sell HD Supply and CND Holdings Inc. to subsidiaries of HDS Investment Holding Inc., an affiliate of funds managed by Clayton Dubilier and Rice, The Carlyle Group and Bain Capital Partners. The deal in 2007 carried a price tag of $8.5 billion. Under the terms of the current agreement, a subsidiary of The Home Depot will commence a cash offer to purchase all outstanding shares of HD Supply common stock for $56 per share, totaling an enterprise value of approximately $8 billion. J.P. Morgan Securities LLC served as exclusive financial advisor for the transaction, which is expected to close amid The Home Depot’s fiscal fourth quarter, ending January 31, 2021 (pending regulatory approvals). Officials for The Home Depot report that the transaction will be funded through cash on hand and debt, and that it is expected to be accretive to earnings in fiscal 2021.

As a national industrial distributor of maintenance, repair and operations (MRO) products for the multifamily and hospitality end markets, HD Supply Holdings Inc. includes approximately 44 distribution centers across 25 states and two Canadian provinces. In March, officials for the company announced that market conditions brought on by COVID-19 derailed plans to separate its facilities maintenance and construction and industrial businesses.

“As our industry reacts to COVID-19 and the large-scale effort to contain it, we remain focused on navigating the crisis, keeping our associates healthy, serving our customers, and protecting the financial stability of our company during these unprecedented times,” said Joe DeAngelo, chairperson, president and CEO, who voluntarily waived his base salary for the reminder of the year starting April 6.

As of August 2, 2020, HD Supply’s combined liquidity was reported at $995 million, comprised of $71 million in cash and cash equivalents and $924 million of additional available borrowings. At the same time, officials said its combined liquidity increased by $198 million from the end of first-quarter fiscal 2020 and by $367 million compared to the end of fiscal year 2019. In August, officials also announced that the company entered into a definitive agreement to sell its White Cap business, a distributor of specialty concrete and construction products and services that targets professional contractors. The business was sold to an affiliate of Clayton, Dubilier and Rice for $2.9 billion in cash, with expected net proceeds of approximately $2.5 billion.

In September, HD Supply announced financial results, including net sales of $1.6 billion for the second quarter of fiscal 2020, representing a decrease of $72 million, or 4.4%, compared to the same period in 2019.

Regarding the reacquisition of a company it sold off just 13 years prior, “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.”

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