Home Depot buys Hughes Supply for about $3.2 billion

ATLANTA (AP) _ The Home Depot Inc., the nation's largest home-improvement store chain, said Tuesday it will buy Hughes Supply Inc., a distributor of construction, repair and maintenance products, for

Tuesday, January 10th 2006, 1:11 pm

By: News On 6

ATLANTA (AP) _ The Home Depot Inc., the nation's largest home-improvement store chain, said Tuesday it will buy Hughes Supply Inc., a distributor of construction, repair and maintenance products, for about $3.2 billion.

The deal would double the size of the Home Depot Supply division, which serves business customers, such as homebuilders, professional contractors, municipalities and maintenance professionals.

Orlando, Fla.-based Hughes Supply, one of the nation's largest diversified wholesale distributors of construction, repair and maintenance-related products, has more than 500 locations in 40 states.

The pending purchase will create the nation's largest diversified distributor of construction, repair and maintenance-related products, and the two companies will serve a $410 billion market, said Home Depot spokeswoman Paula Smith.

Home Depot said it will pay $46.50 per outstanding share for Hughes Supply, a premium of nearly 21 percent over Hughes' closing price Monday of $38.55. In addition, Home Depot will assume $285 million in net debt as part of the deal.

Shares of Home Depot rose 98 cents, or 2.4 percent, to $41.80 in early afternoon trading on the New York Stock Exchange. Hughes shares rose $6.99, or 18 percent, to $45.54 on NYSE.

Home Depot expects the deal will add to earnings per share within its first year.

``By acquiring Hughes Supply, a company with a long and established reputation for excellence and service, we continue to execute our growth strategy laid out five years ago to enhance our core retail business, extend our business into adjacent areas and expand into new markets,'' said Bob Nardelli, chairman, president and chief executive of Home Depot.

Acquiring Hughes Supply fits into the new markets portion of Nardelli's plan, and the company's purchase on Monday of carpet and upholstery cleaning provider Chem-Dry of Logan, Utah, is part of Home Depot's desire to extend business into adjacent areas, Smith said.

Eric Bosshard, executive managing director of FTN Midwest Securities Corp., which covers Home Depot, said Hughes will be a ``wonderful fit'' with the company's existing supply portfolio.

``It reinforces their commitment to their Home Depot supply strategy, which basically is a focus on becoming the industry leader and participating in the growth of the do-it-for-me market,'' he said.

Bosshard said acquiring Hughes could possibly signal that Home Depot is focusing on the supply portion of its business for future growth instead of other strategies such as expanding into Europe, but Smith said the company is sticking to its original focus.

``Continued growth of Home Depot Supply is an important part of our growth strategy but one of many that falls into the strategy that Bob Nardelli laid out,'' she said.

Home Depot will fund the Hughes acquisition with a combination of cash on hand and access to debt capital markets through the company's $4 billion shelf registration.

The acquisition is subject to shareholder and regulatory approvals.