Home Depot on Thursday said it’s acquiring SRS Distribution in an $18.25 billion deal, the most recent and largest sign of its ambitions to drive sales by winning more business from contractors, roofers and other home professionals.
The house improvement retailer expects the acquisition to shut this fiscal yr, which ends in late January. It said it can finance the deal through money readily available and debt.
Home Depot already draws half of its business from pros, while the opposite half comes from do-it-yourself customers. With the deal, the Atlanta-based company is making one more push to achieve the shoppers who tackle complex and lucrative construction jobs, particularly as homeowners pull back on DIY projects. That was one in all the priorities that Home Depot leaders laid out for this yr. It is also why the corporate has been opening a growing network of distribution centers that may stock large quantities of things that pros need, resembling lumber or shingles, and deliver them on to a job site.
The acquisition is the biggest in Home Depot’s history.
In an interview with CNBC, CEO Ted Decker described the deal as “a complementary accelerator” to its efforts to draw more pros. He said the deal increases Home Depot’s total addressable market by $50 billion.
SRS Distribution sells supplies to professionals within the landscaping, pool and roofing businesses. It’s owned by two private equity firms, Leonard Green & Partners and Berkshire Partners.
The McKinney, Texas-based company has roughly 11,000 employees and 760 branches across 47 states. It also has a fleet of 4,000 delivery trucks and a dedicated salesforce that caters to the house pros, Decker said.
The acquisition adds to other recent deals that the retailer has made in the professional space. They include the roughly $8 billion acquisition of HD Supply, a national distributor of maintenance, repair and operations products within the multifamily and hospitality markets, in 2020. Last yr, it also made two other acquisitions for undisclosed amounts:Â International Designs Group, which owns Construction Resources, a distributor of surfaces, appliances and other products that sells to home pros; and Temco, an appliance delivery and installation company.
Decker said he’s confident the deal will get approved by federal regulators, whilst they increase scrutiny of mergers and acquisitions.
“With the separate customer base, different channels, different purchase occasions, we feel good that this can undergo,” he said.
The acquisition is predicted to be dilutive to Home Depot’s earnings per share because of amortization, but accretive when it comes to money earnings per share in the primary yr after the deal closes.
Home Depot has leaned into the professional business as its growth stagnates. The retailer, a significant beneficiary of pandemic trends, has handled moderating sales as consumers tackle fewer home projects and spend more on grocery bills and experiences. Over the past few quarters, customers have bought fewer big-ticket items and tackled smaller, less pricey projects.Â
Decker said last month on an earnings call that Home Depot would concentrate on opening recent stores, attracting more pro sales and attempting to make customers’ shopping experience more seamless.
Home Depot plans to open a dozen recent stores throughout the fiscal yr. It recently announced it can open 4 distribution centers that help support sales to pros.Â
The acquisition comes after the home improvement retailer said last month that it expects slower sales trends to proceed. It said it anticipates total sales for the total yr will grow about 1%, including a further week within the fiscal yr. Yet it expects comparable sales, which take out the effect of store openings and closures and don’t include the extra week, to drop by about 1%.
Home Depot had a complete of two,335 stores across the U.S., Mexico and Canada as of the top of the fiscal yr in late January. It has about 465,000 employees.Â
As of Wednesday’s close, shares of Home Depot are up about 11% this yr. That is barely ahead of the ten% gains of the S&P 500. Home Depot’s stock closed at $385.89 on Wednesday, bringing its market value to about $382 billion.
