HD Supply began life as a division of The Home Depot; after being spun off in 2007 and floating in 2013, it is now returning home.
In what seems like a full-circle move, The Home Depot – the world’s largest home improvements company – has acquired its former subsidiary and fellow Atlanta-based outfit HD Supply for $9.1 billion including net cash.
Back in 2007 – fortuitously, before the house market collapsed – The Home Depot sold HD Supply to Bain Capital, The Carlyle Group and Clayton, Dubilier & Rice for $8.5 billion. Nonetheless, The Home Depot is not quite buying the same company it sold: HD Supply is a slimmer concern, having sold off its waterworks vertical and its construction and industrial business to Clayton, Dubilier & Rice for $2.5 billion apiece in 2017 and 2020 respectively.
Until it was bought by its former owner, HD Supply had floated on the New York Stock Exchange since 2013; its IPO raised around $1 billion. Since then, as the housing market has boomed, the industrials wholesaler has gone from strength to strength, cutting away non-profitable verticals and becoming a lean, successful firm with sales of over $6 billion last year.
HD Supply has plenty of clout, with a customer base of 500,000 across North America. Its $9.1 billion price tag – a 25% premium from HD Supply’s trading shares on Friday – seems steep, but The Home Depot is betting that this utility and maintenance play will position it well amid the pandemic, when many Americans will be looking for more affordable housing.
Legal advisor to The Home Depot: Wachtell, Lipton, Rosen & Katz
Financial advisor to The Home Depot: J.P. Morgan Securities
Legal advisor to HD Supply: Jones Day
Financial advisor to HD Supply: Goldman Sachs