Home Depot to buy building products supplier in $18.25 billion deal amid sluggish demand

FILE PHOTO: The logo of U.S. home improvement chain Home Depot is seen after the Mexican trade union Revolutionary Confederation of Laborers and Farmworkers (CROC) accused Home Depot of blocking union activity, in Mexico City, Mexico January 15, 2020. REUTERS/Luis Cortes/File Photo

(Reuters) -Home Depot will buy building materials supplier SRS Distribution in an $18.25 billion deal including debt, the retailer said on Thursday, bolstering its business among professional customers to counter weak home improvement demand.

The U.S. home improvement industry is staring at sluggish recovery in demand this year, as big home remodeling and renovation projects take a backseat as customers spend judiciously due to sticky inflation.

As a result, Home Depot’s Do-It-Yourself segment has remained under pressure and the company has banked on relatively steady demand from “Pro-customers” – including professional builders, contractors, handymen – to drive sales.

The acquisition of SRS, which serves Pro-customers including roofers, landscapers and pool contractors, would expand Home Depot’s total potential market by about $50 billion to roughly $1 trillion, the company said.

“SRS has built a robust and successful platform that will accelerate our growth with the residential professional customer,” Home Depot CEO Ted Decker said in a statement.

The transaction will unite SRS’s network of more than 2,500 professional sales force and over 4,000 truck fleet and jobsite delivery capabilities to Home Depot’s network of more than 2,000 U.S. stores and distribution centers.

A subsidiary of Home Depot will buy SRS and the deal will be funded through cash on hand as well as debt.

The deal is expected to be completed by the end of fiscal 2024.

(Reporting by Deborah Sophia in Bengaluru; Editing by Sriraj Kalluvila)