Home Depot Acquires Home Systems

World’s largest home improvement retailer The Home Depot Inc. (HD - Analyst Report) recently announced that it has successfully closed the merger of U.S. Home Systems, Inc. This all-cash deal was valued at $95.0 million approximately. It is believed that the merger will help to build a better relationship with the customers by providing them improved home services.

On August 6 this year, Home Depot reached an agreement with U.S. Home Systems, where Home Depot has to pay $12.50 per share to about 7.6 million shareholders. The agreed deal price was 38% higher than the closing price on August 6.

The newly acquired company will be operated as a wholly-owned subsidiary of Home Depot. U.S. Home System has been delisted from NASDAQ Global Market after the trading hours on October 26, 2012.

U.S. Home Systems, Inc. manufactures or procures, designs, sells and installs custom quality specialty home improvement products for The Home Depot in certain markets. The Ccompany's home improvement products are marketed nationally under the The Home Depot Kitchen and Bathroom Refacing and The Home Depot Installed Decks brand.

Home Depot is a leading player in the highly-fragmented home improvement industry. We believe the recent acquisition will provide new opportunities to Home Depot for driving sales.

Further, the company has implemented significant changes to its store operations to make these simpler and more customer-friendly. In addition, the company has reinvigorated itself with a shift in focus from new square footage growth to maximization of productivity through its existing store base. We believe these initiatives will induce more customer traffic to its stores while boosting the top line.

Moreover, with the introduction of new warehousing and transportation system, the company has been able to improve its supply chain while minimizing cost. Further, this has facilitated Home Depot to improve its Central Automated Replenishment System for immediate refilling of stock while reducing its investment in inventory.

However, the company’s business is highly competitive, primarily based on customer services, price, store location and assortment of merchandise. It faces stiff competition from local, regional and international players as well. To maintain its market share, the company is making selective acquisitions and strategic alliances with third parties, which are increasing its operational risks.

Home Depot, which competes with Lowe's Companies Inc. (LOW - Analyst Report), currently has a Zacks #2 Rank, implying a short-term Buy rating.