Home Depot to acquire specialty distributor SRS for $18.25 billion in huge bet on growing pro sales

Folks, we do have some breaking news coming out right now on a Dow component Home Depot. The company is acquiring SRS Distribution for 18 and a quarter billion dollars. SRS is a leading building products distributor that supplies professional roofers, landscapers and pool contractors. Home Depot says that that acquisition will accelerate its growth within the residential professional customer. It’s been a really big deal. HD Pro, that’s where they’ve seen a lot of the growth. Home Depot says it expects to complete the deal by the end of this year. I just got off the phone with the CEO and the CFO talking a little bit about this. I was not familiar with SRS. It was founded in 2008 and it’s grown every year. In fact, the Home Depot CEO Ted Decker says it was up last year during our period of moderation. Did see Home Depot sales or Home Depot Depot’s earnings slow after the phenomenal growth they saw during the Pandemic. SRS is based in the greater Dallas area. The entire management team is sticking around. They’ve got 760 branches in 47 states, a sales force of 2500 people, and 4000 trucks that delivered directly to the job sites. I don’t, I don’t know. I got to look at the rest of this. It looks that it’s going to meet one of Home Depot’s three big goals this year. They said this is one of the big opportunities Decker did because the Pro is where you see all of the growth happening. That’s what they’ve been trying to expand on. Just in terms of the total addressable market right now, Home Depot has a total addressable market of about $950 billion in what is I believe a $45 trillion market. If you just look at Home values overall, they think that this acquisition will raise their their Tam to a trillion dollars that they’ll then have a much bigger addressable market looking to close by the end of the year. They say it will be gap dilutive in the first year because of amortization of the deal but cash accretive in year one. I think the big issue here though is going to be what regulators say and whether they saying off on this Decker saying they don’t anticipate any regulatory issues because it is a separate customer base, but there is a breakup fee. They wouldn’t tell me how big the breakup fee is, it’s going to be in the SEC filings later today. But we all know the regulatory environment that you’re looking at SRS is number two and pools for instance Home Depot obviously the biggie and we’ll see what kind of scrutiny this gets. 382 billion years ago we would have thought wow that’s a lot for Home Depot, but they can seems like they could easily do do an acquisition like this out. While you were talking about saying so there’s a a big market in there’s regular Home Depot and then there’s the pros the pro that’s what this yeah. The contractor. Is there something for people that have no ability whatsoever to use Home Depot products like there’s a pro. Yeah. Light bulb no. I need. I need here’s like the normal person that I see there the normal and then these are really professionals doing a ton of contractors do it. Home building. Yeah, that kind of. They use. This is a huge market. The people who are going for light bulbs, people that hurt their thumbs, people that, yeah, need seed for the yard that when I hear someone’s putting in a bathroom. Oh, by themselves. Yeah. Yeah, people do that. Yes, they do. They’re putting cabinetry. They do. And some people find that an attractive feature for a man to have got lucky with Penelope because yeah, OK, let’s. But look, it’s a big deal. Yesterday, I was just looking through some of the analyst notes. Yesterday, DA Davidson cut its rating on Lowe’s, Home Depot’s biggest competitor. And they said even though he loves Marvin Ellison and the leadership there, they’re going to have a real tough time. He all about growth in terms of growth. And his suggestion in that note was for Lowe’s to do something with the contractor. That has been a really strong point for Home Depot. Further, this is going to make Home Depot even bigger. Yeah Lowe’s things even further from that that niche that Home Depot can can occupied. So well Home Depot we we saw the the stock have been down it come back with a vengeance. So it has come back with a vengeance after uncharacteristically some weakness there that you know that’s that’s just months but if you go back a year or so you could see her two years these comments there it is. That was weird. Cash on hand and debt for for they have some debt SRS reading through the press release right now Dallas they know how to build things there I guess. Uh huh greater Dallas area. I I was shocked that this company was just founded in 2008. That’s a really big fast growth. Yeah.