After a 13-year separation, Home Depot is reconnecting with the former subsidiary HD Supply as part of an acquisition worth around 8 billion US dollars.
The purchase is an offer from Home Depot to grow the professional customer base instead of just focusing on the hobbyists who do it themselves. The transaction is expected to close in late January, pending customary regulatory approvals.
The home improvement giant sold HD Supply – a provider of maintenance, repair, and operations (MRO) products and services – to a group of private equity firms in 2007 for approximately $ 10.3 billion. This group included Bain Capital, Carlyle Group and Clayton Dubilier & Reis.
Since that sale, HD Supply has shed a number of its assets. The dissolution of HD Supply’s power solutions and waterworks division allowed the company to focus exclusively on the MRO business, whose customers include healthcare providers, apartment complexes, hospitality and others. These customers are sold everything from bleach and plastic ice bucket liners to paint and doors, and they get additional services like financing, general contractors and labor.
HD Supply’s renewed focus on the MRO business again made the company an attractive acquisition target.
“Over time, the HD delivery business has been largely limited to the MRO maintenance equipment business that we only offer today,” said Home Depot CEO Craig Menear on a earnings call today. “It’s strategically in line with what we’re trying to achieve in the MRO business, much more than it was a few years ago. So from a time perspective, that’s the logic. “
Home Depot itself re-entered the category in 2015 and agreed to purchase Interline Brands, a national distributor and direct marketer of broadband MRO products. That purchase totaled approximately $ 1.6 billion in cash. Home Depot sees the $ 55 billion space as highly fragmented and ready for growth.
“Since taking over Interline in 2015, we have successfully organically expanded our MRO business. With this acquisition, we are the leading provider in this area, ”said a Home Depot spokesman in an email to Adweek. “The home maintenance business has been of strategic interest to The Home Depot for many years. We believe the HD Supply business represents a significant growth opportunity for The Home Depot, in line with and complementary to our current Pro strategy. “
In particular, the acquisition will strengthen Home Depot with a robust product catalog, value-added service features, experienced sales force and a national network of 44 distribution centers in the US and Canada.
During the call for results, Menear pointed out that the MRO customer is also an important professional customer for Home Depot, which the DIY store would like to maintain as part of its general transformation strategy, which it calls “One Home Depot”. In fact, the dealer’s professional business grew double-digit in the third quarter and saw the strongest growth this year.
“This deal offers the opportunity to expand your active record [professional] Customers, especially multi-family accounts that represent [about] 64% of [HD Supply’s] Facility Maintenance Sales, ”said Jonathan Matuszewski, an analyst at Jefferies. “With a stronger sales team and an improved supply chain, we have no doubt [Home Depot] will be a more prominent player in the $ 55 billion MRO market in the years to come. “
The home improvement retailer believes that the provision of maintenance, repair and operational products for multi-family apartment complexes through HD Supply will inspire these managers and contractors to turn to Home Depot for larger, more thorough renovation projects.