ACQUISITION: FTC Approves $10.3b HD Supply Sale
Jason Sandefur
Home Depot got approval from the Federal Trade Commission to sell its fastener businesses as part of a roughly $10.3 billion deal by three private equity firms to acquire HD Supply, the wholesale distribution arm of Home Depot, according to Reuters.
HD Supply includes three fastener companies that Home Depot acquired in 2005 and 2006: Crown Bolt, Brampton Fastener (Brafasco) and Western Fasteners.
Bain Capital Partners, Carlyle Group and Clayton, Dubilier & Rice are now cleared to buy the division.
HD Supply has nearly 1,000 locations in the U.S and Canada with more than 26,000 employees. The division sells to the infrastructure, construction and maintenance supply industries. HD Supply reported revenue of $12.1 billion in 2006, about 13% of overall Home Depot sales.
The sale price is reportedly lower than investors and analysts had expected.
“Home Depot may be taking a bit of a price concession,” analyst Keith Davis of Farr Miller Washington told Reuters. “They are kind of selling at a bad time. They believe that shareholders would rather see them get it done.”
The company launched the supply business in 1997 and expanded it by paying $3.2 billion for Hughes Supply in 2006.
“When the market was really strong, Home Depot viewed the supply business as a way to diversify,” Davis noted. “Now people think it makes sense to get back to basics and focus on the retail side.”
“With annual revenues of approximately $12 billion, HD Supply is a healthy, growing and vibrant business, and we are undertaking this evaluation to determine whether there are strategic alternatives with respect to HD Supply that would optimize shareholder value,” CEO Frank Blake announced in February after Robert Nardelli was ousted as CEO. Nardelli had planned to grow the distributor business until it generated 20% of the Home Depot”s revenues.
Some Home Depot investors complained that the wholesale division is a diversion from the core retail business. Some also questioned the $8 billion Nardelli spent to acquire the 38 companies that became HD Supply. Web: hdsupplyinc.com and homedepot.com \ �2007 FastenerNews.com
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