Home Depot Completes $8B HD Supply Deal; Street Sees 14% Upside

Home Depot has completed the acquisition of HD Supply Holdings for an enterprise value of about $8 billion. With the completion of the deal, HD Supply has now become a wholly-owned subsidiary of Home Depot.

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Home Depot (HD) announced the acquisition of the national distributor of MRO (maintenance, repair and operations) products to multifamily and hospitality end markets last month. The home improvement retailer had spun-off HD Supply in 2007.

“The combination of the two businesses will enable us to better serve both existing and new MRO customers, and I look forward to the value this acquisition will bring to our associates, customers and shareholders,” Home Depot’s CEO Craig Menear said. (See HD stock analysis on TipRanks)

On Nov. 17, Wells Fargo analyst Zachary Fadem reiterated a Buy rating on the stock and a price target of $310 (14.4% upside potential). In a note to investors, Fadem said, “HD [is] a LT (long-term) winner with offensive/defensive characteristics, accelerating share gains, and ample financial flexibility.”

Commenting on the HD Supply deal in a report on Nov. 16, Fadem noted that the transaction would “accelerate HD’s strategic initiatives to better serve Professional customers, broaden its ability to provide job site delivery (via HDS’s logistics capabilities), and enhance HD’s existing MRO/Interline capabilities.”

Most of the Street has a bullish outlook on the stock. The Strong Buy analyst consensus is based on 11 Buys and 3 Holds. The average price target stands at $309.57 and implies upside potential of about 14.2% to current levels. Shares have gained 24.1% year-to-date.