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The Home Depot aims to expand its professional customer base to better address lukewarm demand, buying building materials supplier SRS Distribution for $18.25 billion, the largest deal for a top U.S. home improvement chain. The company plans to acquire the company in a dollar transaction.
The company and rival Loews Cos. expect the recovery to slow this year as U.S. consumers pause large home remodeling and renovation projects due to persistently high inflation.
This has put pressure on Home Depot’s do-it-yourself (DIY) division, which accounts for about half of its business, and the company is focusing on “pro customers” such as professional builders, contractors and handymen to boost sales. I started putting . .
| ticker | safety | last | change | change % |
|---|---|---|---|---|
| HD | The Home Depot Co., Ltd. | 385.89 | +5.96 | +1.57% |
| low | Lowe’s Companies, Inc. | 253.33 | +1.91 | +0.76% |
Thursday’s agreement expands Home Depot’s total market potential by about $50 billion to about $1 trillion, the company said. In 2020, Home Depot bought back industrial materials wholesaler HD Supply Holdings in an $8 billion deal.
SRS is a portfolio company of private equity firms Leonard Green & Partners and Berkshire Partners, serving professional clients such as roofing contractors, landscapers, and pool contractors. It will operate as an independent division within Home Depot under its current leadership team.
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Leonard Green had bought a majority stake in SRS in 2018 in a $3.55 billion deal, people familiar with the matter told Reuters on Thursday.
According to the person, in December Leonard Green allowed some fund investors to withdraw cash from SRS, which was valued at about $16 billion, including debt, and the company was in the process of being sold. Home Depot also agreed to the deal, it added.
Home center located in Miami, Florida. (Jeffrey Greenberg/Education Images/Universal Images Group via Getty Images/Getty Images)
“This is a great deal at the perfect time,” said Thomas Hayes, chairman of Great Hill Capital.
“You only have to look at the housing shortage and young millennials to see that the more moderate interest rates are, the more construction will boom,” he said.
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Home Depot shares, which have a market capitalization of $382.42 billion, were flat in early trading, according to LSEG data.
With this acquisition, SRS’ network of more than 2,500 professional salespeople at more than 760 locations will join Home Depot’s presence in more than 2,000 stores and distribution centers in the United States.
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The transaction includes the assumption of SRS’s debt, will be funded with cash on hand and debt, and is expected to close by the end of fiscal 2024.
SRS, which had revenue of $10 billion in 2023, is making acquisitions. According to its website, the company has closed 17 deals over the past three years, mostly with roofing, metal and building materials suppliers.
