Home Depot making $18.25 billion acquisition
The Home Depot is making its biggest commitment yet to its home professional (“pro”) business.
In the largest acquisition in its history, the home improvement giant has entered into an agreement to acquire SRS Distribution Inc. (SRS), a building products supply company serving the professional roofer, landscaper and pool contractor sectors. Total value of the deal (including net debt) was put at approximately $18.25 billion.
The transaction is expected to be funded through cash on hand and debt.
"We plan to access the debt capital markets to raise incremental indebtedness in support of this acquisition, said Richard McPhail, executive VP and CFO.
Based in McKinney, Texas, SRS operates a 760-plus branch network across 47 states. It also has a fleet of 4,000 delivery trucks, jobsite delivery capabilities and a dedicated 2,500-plus salesforce.
The deal comes as Home Depot has been ramping up its efforts to better serve contractors and other home improvement professionals. In March, the retailer said it would open four new distribution centers geared toward serving pro customers during the first half of 2024.
The company also recently acquired Construction Resources, a distributor of design-oriented surfaces, appliances and architectural specialty products for pro contractors. Pro customers currently account for about half of Home Depot’s sales.
SRS, a portfolio company of Leonard Green & Partners and Berkshire Partners, is an industry leader with a proven track record of profitable growth across verticals, Home Depot CEO Ted Decker said in a statement.
"SRS's ability to build leadership positions in each of its trade verticals while generating significant revenue growth is a testament to its strong vision, leadership, culture and execution," he continued. "SRS has built a robust and successful platform that will accelerate our growth with the residential professional customer while presenting future opportunities with the specialty trade pro."
In a post on his LinkedIn page, Decker wrote that Home Depot believes growing its pro business will fuel its next generation of growth.
"This acquisition will help us better sell the whole project and capture a new purchase occasion we haven’t traditionally served," he said.
With the acquisition, the retailer said it now believes its total addressable market has grown by about $50 billion, to approximately $1 trillion.
The deal, which is subject to regulatory approval, is expected to close by the end of fiscal 2024. Dan Tinker, president and CEO of SRS, and his senior leadership team will continue to lead the company
"Our team is thrilled to join The Home Depot," said Tinker. “We are looking forward to combining our differentiated assets and capabilities, including our extensive branch network, experienced sales team, robust trade credit offering, and order management system, geared at serving the complex project purchase occasion, with The Home Depot's competitive advantages. We believe this will enable us to better serve pros and continue growing in our large and highly fragmented market."
Home Depot had a total of 2,335 stores across the U.S., Mexico and Canada as of the end of the fiscal year in late January.