Home Depot said on Monday it would buy HD Supply Holdings in a deal valued at about $8 billion, setting itself up to regain control over the industrial materials wholesaler after spinning it off over a decade ago.
The top U.S. home improvement chain said it would offer $56 in cash for each share of HD Supply, a near 25% premium to the stock's last close. HD Supply's shares jumped 24.5% on the news.
With the deal, Home depot is looking to expand its reach into building utility and maintenance products, betting that the economic toll of the COVID-19 pandemic will force swathes of Americans to look for affordable housing.
"With a bolstered sales force and enhanced supply chain, we have no doubt Home Depot will be a more formidable player in the$55 billion maintenance, repair and operations market for years to come," Jefferies analysts wrote.
Home Depot, which sold HD Supply in 2007 for $8.5 billion to Bain Capital, Carlyle Group and Clayton, Dubilier & Rice, said it will fund the buy back through a combination of cash and debt.
HD Supply, one of the largest distributors of appliances, plumbing, and electrical equipment in North America with over 500,000 customers, is expected to be accretive to earnings in 2021, Home Depot said.
J.P. Morgan Securities LLC served as financial adviser to Home Depot on the deal, which is expected to close in its fourth fiscal quarter. The company will report third-quarter results on Tuesday.