Home Depot (HD 2.12%) has found a use for its growing pile of cash. The home improvement giant announced on Monday that it is acquiring HD Supply Holdings (HDS) for $8 billion, or $56 per share. The stock closed at $45 on the previous trading day.
The move will boost Home Depot's presence in the maintenance, repair, and operations niche. HD Supply counted 500,000 customers in that segment by late 2019, which supported annual sales of $6.1 billion.
Home Depot likes the buyout fit because it gives the retailing giant a chance to consolidate a large and fractured industry that includes contractors, home builders, and industrial businesses. "This acquisition will position the company to accelerate sales growth in a highly fragmented $55 billion marketplace," CEO Craig Menear said in a press release.
The purchase is expected to close by early 2021, Home Depot said, and will be funded through cash on hand and new debt. Investors should get additional details about management's long-term hopes for the HD Supply segment when Home Depot announces its fiscal third-quarter results on Tuesday, Nov. 17.