By Deborah Mary Sophia and Abigail Summerville
(Reuters) – Residence Depot (NYSE:) will purchase constructing supplies provider SRS Distribution in an $18.25 billion deal, within the prime U.S. residence enchancment chain’s largest deal because it seems to broaden its skilled buyer base to raised deal with tepid demand.
The corporate and rival Lowe’s (NYSE:) Cos have projected a slower restoration this yr as U.S. shoppers pause huge residence transforming and renovation initiatives resulting from sticky inflation.
This has put strain on the Do-It-Your self (DIY) section, which makes up about half of Residence Depot’s enterprise, and the corporate has sharpened its concentrate on “Professional-customers” corresponding to skilled builders, contractors, handymen to drive gross sales.
Thursday’s deal will broaden Residence Depot’s complete potential market by about $50 billion to roughly $1 trillion, the corporate stated. In 2020, Residence Depot had purchased again industrial supplies wholesaler HD Provide Holdings (NASDAQ:) in an $8 billion deal.
SRS, a portfolio firm of personal fairness corporations Leonard Inexperienced & Companions and Berkshire Companions, serves Professional-customers together with roofers, landscapers and pool contractors. It is going to function as an unbiased unit inside Residence Depot underneath its present management crew.
Leonard Inexperienced had purchased a majority stake in SRS in a $3.55 billion deal in 2018, an individual aware of the matter advised Reuters on Thursday.
Final December, Leonard Inexperienced allowed a few of its fund buyers to money out of SRS at a valuation of about $16 billion, together with debt, the supply stated, including Residence Depot agreed to the deal following a sale course of for the corporate.
“This can be a nice deal at a good time,” stated Thomas Hayes, chairman at Nice Hill Capital.
“You want (to) solely look to the housing scarcity – and younger demographics of our millennials – to grasp that as charges reasonable development will growth,” he stated.
Shares of Residence Depot, which has a market worth of $382.42 billion based on LSEG information, had been flat in early buying and selling.
The acquisition will add SRS’ community of greater than 2,500 skilled gross sales drive in 760 plus places to Residence Depot’s footprint of greater than 2,000 U.S. shops and distribution facilities.
The deal, which might contain taking up the debt of SRS, can be funded with money readily available and debt and is anticipated to shut by the tip of fiscal 2024.
SRS, which raked in $10 billion in income in 2023, has been on an acquisition spree. It closed 17 offers up to now three years targeted on roofing, metallic and constructing supplies suppliers, based on its web site.