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Home Depot acquires Hughes

The deal will add $4.4-billion in annual commercial construction equipment and materials sales to the chain.

By MARK ALBRIGHT
Published January 11, 2006


Home Depot Inc., which made its name with do-it-yourselfers, continued to elbow its way into the commercial building industry on Tuesday by agreeing to buy Hughes Supply Inc. of Orlando for $3.19-billion.

The acquisition, which at $46.50 a share represents a 21 percent premium to Hughes stockholders, will cost Orlando one of its two remaining public headquarters companies.

It also will add $4.4-billion in annual commercial construction equipment and materials sales to the Home Depot ledgers at a time when squeezing more easy growth from the chain's more than 1,300 stores is getting tougher.

"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 Robert Nardelli, chief executive officer of Home Depot.

Shares of Hughes Supplies soared 18 percent to close Tuesday at $45.61, up $7.06. Home Depot shares closed at $41.80, up 98 cents, after the deal was unveiled.

With Hughes' network, which sells to builders and utilities direct from 500 outlets in 40 states, Home Depot will double its commercial construction materials business to $12-billion a year. The Atlanta chain is the nation's second largest retailer with annual revenues of $73-billion in 2004.

"Home Depot is clearly serious about building the supply business," said Eric Bosshard, an analyst with FTN Midwest Securities.

Founded in 1928 by Clarence Hughes and his son Russell as an electrical supplies distributor, the company was steered by its founding family until 2003 when an outside manager was recruited. They built a company that gets about 30 percent of its revenues from residential construction with the rest from commercial real estate, industrial and municipal users.

In October, Hughes hired financial advisers to consider outside offers. Through 110 outlets in Florida, including a dozen in the Tampa Bay area, the company sells everything from rebar to electrical and plumbing equipment. It also supplies fire hydrants, meters, pipe and other equipment used by electric utilities and public water and sewer departments.

Home Depot also recently acquired pipes, valves and water system parts supplier National Waterworks Holdings, a Canadian commercial lighting supplier and Williams Brothers Lumber Co. of Suwanee, Ga. The company provided no details on how it plans to operate Hughes or integrate the business into its own.

Mark Albright can be reached at albright@sptimes.com or 727 893-8252.

[Last modified January 11, 2006, 00:41:19]


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