Home Sweet Home Depot

Yesterday Home Depot announced a deal to acquire HD Supply in a deal valued at $8 billion.

Yes, those two names sound suspiciously familiar for a reason – HD Supply was once a subsidiary of the beloved home improvement retailer. 

The Prodigal Supplier

HD Supply is one of the largest wholesale distributors in the electrical, plumbing, and janitorial end-markets.  

Home Depot built the business through a series of acquisitions in the early 2000s before selling it to a gaggle of private equity firms just before the Financial Crisis.

Now, 13 years later, Home Depot wants its baby back.

  • Through its 44 distribution centers in the U.S. and Canada, HD Supply sells over 200,000 different product SKUs.  Think everything from ovens and fridges to bleach and printers. 
  • After selling its construction and industrial distribution business earlier this year, HD Supply is solely focused on serving professionals who maintain facilities such as multi-family properties and restaurants.

Professional All-In

Home Depot is already a bigger name in home improvement than Tim Allen, so what does HD Supply bring to the table?

Some analysts say the acquisition will help Home Depot double down on the professional market (which already accounts for roughly 45% of the company’s sales).

Others point out that Home Depot may simply be running out of retail growth.  The president of Customer Growth Partners told the FT that Home Depot is “really maxed out in terms of store locations, so what’s going to be its growth vehicle? This could maybe be it.”

The Takeaway

Home Depot will pay a 25% premium to HD Supply’s Friday closing price.