Home Depot Strikes Deal To Buy HD Supply

The Home Depot, the Atlanta-based home improvement retailer, has entered into a definitive deal to buy a national distributor of maintenance, repair and operations (MRO) items in the apartment and hospitality end markets.

The acquisition of HD Supply Holdings, Inc. is anticipated to position the retailer as the top provider in the MRO space, according to a Monday (Nov. 16) announcement.

HD Supply, a former Home Depot unit, provides a wide range of items and “value-add services” to roughly 300,000 clients with “leadership positions in the living space maintenance, repair and operations sector,” according to the announcement.

A subsidiary of the retailer will start a cash tender offer to buy all of HD Supply common stock outstanding shares at $56 per share under the terms of the merger deal for a roughly $8 billion total enterprise value.

The closing of the tender offer is subject to the usual closing conditions such as regulatory go-aheads and “the tender of a majority of the shares of HD Supply common stock then outstanding (on a fully diluted basis),” according to the announcement.

It is anticipated to be finished during the retailer’s fiscal Q4, which concludes on January 31 of next year. It is expected to be funded via loans and cash on hand.

“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,” The Home Depot Executive Vice President and CFO Richard McPhail said in the announcement.

In August, The Home Depot reported $38.1 billion in sales for Q2, up 23.4 percent from the same period a year prior.

Net earnings for the quarter grew to $4.02 per diluted share or $4.3 billion in contrast with net earnings of $3.17 per diluted share or $3.5 billion for Q2 in 2019.

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