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HD Supply to Combine With Home Depot in Cash Transaction

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HD Supply Holdings, Inc. (HDS - Free Report) yesterday announced agreeing to let Atlanta, GA-based The Home Depot, Inc. (HD - Free Report) to acquire its outstanding shares in an all-cash transaction. The transaction has been approved by the boards of directors of both companies.

HD Supply’s shares gained 24.5% yesterday, ending the trading session at $55.77. The spike in the stock price primarily reflected the market’s reaction to the agreement between HD Supply and Home Depot.

It is worth mentioning here that Home Depot is the world’s largest retailer specializing in home improvement products. In 2019, the company generated $110.2 billion in net revenues and $11.2 billion of earnings.

Inside the Headlines

As agreed upon, the transaction includes HD Supply’s Canada and USABlueBook operations. After the floatation of a tender offer by Coronado Acquisition Sub Inc. — a subsidiary of Home Depot, shareholders of HD Supply will receive $56 in cash for each share held by them. Post the offering, the remaining shares of HD Supply will be converted into cash consideration in a merger arrangement.

HD Supply believes that the above-mentioned transaction is in the best interest of shareholders, associates and customers. Subject to the receipt of regulatory approvals and the satisfaction of customary closing conditions, the transaction is anticipated to close in the quarter ending Jan 31, 2021.

Zacks Rank, Estimate Trend and Price Performance

With a market capitalization of $7.3 billion, HD Supply currently carries a Zacks Rank #3 (Hold). Its solid product offerings (especially related to healthcare), diversified end-market presence and solid capital allocation policies are likely to benefit in the quarters ahead. However, the pandemic-related uncertainties are concerning.

In the past 30 days, the company’s earnings estimates have moved 0.5% south to $2.09 for fiscal 2020 (ending January 2021) and 7.4% to $1.87 for fiscal 2021 (ending January 2022).

HD Supply Holdings, Inc. Price and Consensus


HD Supply Holdings, Inc. Price and Consensus

HD Supply Holdings, Inc. price-consensus-chart | HD Supply Holdings, Inc. Quote

In the past three months, the company’s shares have gained 35.4% against the industry’s growth of 30.5%.


Stocks to Consider

Two better-ranked stocks in the industry are DMC Global Inc. (BOOM - Free Report) and SiteOne Landscape Supply, Inc. (SITE - Free Report) . Both companies currently carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

In the past 30 days, current-year earnings estimates for both companies have moved north. Further, the earnings surprise for the last reported quarter was 180% for DMC Global and 27.06% for SiteOne Landscape.

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