(Bloomberg) – Home Depot Inc. Building Products Distributor HD Supply Holdings Inc. agreed to buy the home improvement retailer over a period of more than a decade after splitting with its former subsidiary.
Home Depot will buy all the remaining shares at a price of about $ 56, according to a statement on Monday, which represents a premium of 25% off the HD supply’s closing price on Friday. With about 166 million shares outstanding, the offer is worth about આશ 7. billion, according to the filing. The deal, which includes net cash, has an enterprise value of 8 8 billion, the companies said.
The acquisition brings together two companies that lived under the same roof and will give Home Depot more exposure to the business contractor side of the business. Like self-repairs, that part has thrived during the epidemic because Americans want to improve the homes in which they are spending more time.
Shares of HD Supply rose 24% in New York at 11:56 a.m., and Home Depot rose less than 1%. By Friday’s close, HD supply had grown 11% this year, while Home Depot had grown 27% over the same period.
HD Supply, one of North America’s largest industrial distributors, offers everything from bleach to doors and ceramic tiles to approximately 500,000 customers in 270 branches and 44 distribution centers, according to its annual report.
HD supply is “a good business with solid margins,” analyst Chuck Grome with Gordon Haskett said in a note. He said the company has faced underwest investment in recent years, giving buyers a chance to improve the business. Grom May added that the merger could add up to 33 cents to Home Depot’s earnings.
HD supply is slowing, making it an “extremely lucrative asset in an attractive market segment,” RBC analyst Scott Seekarelli said in a note.
The deal speeds up Home Depot, which was considered an essential retailer at the start of the epidemic with rival Lowe’s Kos and remained open despite many stores being closed for months. The HD supply transaction, which is handed over and handed over by cash on hand, is expected to be completed in the financial quarter of Home Depot, which ends on January 31st.
Commercial sales
Drew Reading, an analyst at Bloomberg Intelligence, said commercial customers currently account for about 45% of Home Depot sales, and HD Supply could help cement its leadership position. “Although the slow growth in HD supply has led to an increase in commercial end-markets, the sales trend of the pros continues to improve and may pick up in 2021.”
In 2007, Home Depot sold construction-supply units to a group of buyout companies – Carlyle Group LP, Ben Capital LLC and Clayton, Dublier and Rice LLC. The deal was initially valued at 10. 10.3 billion, including debt, but in the midst of a housing crisis, it turned back to $ 8.5 billion. The chain was then unveiled in 2013.
Bloomberg News reports that Lowe recently contacted HD Supply and the announcement was made Monday, a week after the companies were holding preliminary talks citing people familiar with the matter at the time. The report also said it was not clear if discussions had taken place with other suitors. Lowe then said he was not in negotiations and had no plans to move the transaction forward.
(Updates with the analyst’s comment in the seventh paragraph. The previous version of this article corrected the number of outstanding stocks and equity value)
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