Home Depot buys Hughes Supply

ATLANTA - In its boldest move yet into industrial/commercial distribution, Home Depot, the world's largest home improvement dealer, has agreed to purchase Hughes Supply, an Orlando, Fla.-based wholesaler of diversified construction, repair and maintenance products, for $46.50 per share and the assumption of $285 million in debt. This deal would translate into $3.47 billion, and represents a 21% premium over the trading price of Hughes' stock. Hughes Supply, which was founded in 1928, is the largest distributor of these products in North America. The company employs 9,600 people, and distributes 350,000 products to more than 100,000 customers from 500-plus branches in 40 states and in Canada. Its product categories include water and sewer, which accounted for 26.2% of its $4,066.2 billion in revenue through the first nine months of its fiscal year in 2005. Other categories include plumbing/HVAC (21.1%), utilities (16.4%), maintenance and repair (9.1%), electrical (8.9%), and building materials (5.5%). In August, Hughes Supply acquired TVESCO, which distributes transmission and electrical commercial products. Home Depot will fold Hughes Supply into its Home Depot Supply division, which services business-to-business customers such as homebuilders, contractors, municipalities and maintenance organizations. In a prepared statement, Depot estimated, with the addition of Hughes, sales from this division would approach $12 billion. (This acquisition essentially doubles the size of Home Depot Supply, which includes companies such as White Cap and Maintenance Warehouse) The dealer estimates that the market this division serves represents a $410 billion industry. Depot indicated that Hughes Supply's management team, led by its president and CEO Tom Morgan, would stay on to run the company. However, it is likely that some changes are in the offing for Hughes Supply, which on October 31 hired two financial advisors to help it explore "strategic alternatives." Through the first nine months of 2005, Hughes' net income was only $118.9 million, or 2.9% of revenue. The retailer said it would fund this acquisition, the largest in its 27-year history, through cash on hand and with access to debt-capital markets through its $4 billion shelf registration. Days before this deal was announced, Home Depot disclosed that it had acquired Chem-Dry, a carpet and upholstery cleaning service provider, for an undisclosed sum. Chem-Dry, based in Logan, Utah, has about 4,000 franchises, including 2,500 in the U.S. It is being folded into Depot's At-Home Services division (see "Companies in the news").

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CanWel, hardware division announces details of TruServ Alliance

VANCOUVER-The alliance between hardware wholesaler CanWel Hardware and co-op retail organization TruServ Canada has resulted in some reorganization of its management teams. Tom Donaldson, president of CanWel Building Materials Income Trust, parent of the CanWel, Hardware division (formerly Sodisco-Howden Group), announced details of the reorganization last week. "Consistent with our objective for CanWel, Hardware Division to focus on our core strength of distribution," said Donaldson in a prepared statement, "a new organization called PRO Retail Services will implement best practices in banner management, advertising and merchandising under the direction of TruServ." PRO Retail Services will operate from CanWel's Montreal office under Terry Derraugh, TruServ's vice-president of merchandising. The alliance was created in November 2005 to parcel out the operations bundled up in CanWel's acquisition of the former Sodisco-Howden Group. That group's dealer base will continue to be supplied by CanWel, Hardware Division, under the aegis of Jack Van Kessel, vice-president and general manager. Activities related to distribution, including pricing and rebates, will remain under CanWel. Claude St. Louis and his pricing team will now report to Van Kessel; the rebate group will now report to Marc Fortin, director of finance. According to Van Kessel, no changes will take place with the buying teams, who will oversee replenishment from their offices in London, Ont., and Victoriaville, Que. "They stay intact within the CanWel, Hardware Division structure." However, negotiations with vendors will be turned over to Derraugh at TruServ, who now has CanWel, Hardware Division's merchandising people reporting to him. They include Claude Chalifour, director of merchandising, and his team, including the marketing administrative support person, Marianne Scott. "Essentially, they continue to do what they've always been doing, which is to negotiate the best deals on behalf of CanWel, Hardware Division," says Van Kessel. "The only thing that's different is that we've relinquished those management duties to TruServ, because that's what they do best." Dealer development now falls under TruServ, as well, headed up by Tony DiEmanuele, vice-president, business development & growth. Bernard Pelissier, Sylvie Boisvert, Alain Di Vincenzo, Eric Lebrun and their respective teams will now report to DiEmanuele. TruServ's own area DC in Kitchener, Ont., will continue to serve TruServ's agricultural customers throughout Ontario that operate under the FS and Country Depot banners. "TruServ's core competencies are banner management, marketing, product selection and vendor selection. CanWel's focus will continue on being the best distributor of LBM and hardware to Canada's independent retailers," says Donaldson. CanWel, which converted to an income trust structure last year, is one of Canada's largest national distributors in the building materials and related products sector, operating 17 distribution centers across Canada.

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RONA plans expansion on all fronts in '06

BOUCHERVILLE, Que.-RONA inc., Canada's number-two home improvement retailer, plans to open 15-20 new stores in 2006. This is almost double the number of stores it opened last year. Up to 15 of those stores will be big boxes, while at least five traditional building centers will be opened, as well. The emphasis of those traditional stores will be RONA's new "neighborhood" concept, which takes a number of big box boutique concepts and fits them into 40-50,000 sq.ft. A store that opened last September in Richmond, B.C., was the first to implement many of these neighborhood concepts. RONA also wants to add about $200 million to its retail sales through dealer recruitment this year, compared with $175 million that was added in 2005. Big box stores are under way in Langford, B.C., Winnipeg, and Barrie, Ont. Other big box stores for Ontario will soon break ground in Whitby South, Bowmanville, Flamborough and London. In addition, a 50,000-sq.ft. "Neighborhood" store will begin construction soon in Collingwood, Ont. Alberta will be the scene of openings in Spruce Grove and Winkler. RONA's Totem division in Alberta will see construction begin soon of a new Totem Store soon in Okotoks, south of Calgary. In Manitoba, a traditional store will be erected in Winkler.

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Strober parent buys Lanoga

BOSTON-The number-three pro dealer in the U.S. is getting a new owner. Lanoga Corp. is being sold off by its parent, Laird Norton Co., to Fidelity Capital, the business development arm of Fidelity Investments. Fidelity Capital also owns the Strober Organization, the sixth largest professional building materials dealer in the U.S. Under the new organization, Fred Marino, who heads up Strober, will become CEO of the combined operations, and share the title of vice-chair with Lanoga's president and CEO, Paul Hylbert. "This is a fabulous opportunity for both Lanoga and Strober," said Marino in a prepared statement. "Lanoga's operations are an excellent strategic fit with our current Strober holdings and will benefit the customers of both firms." The sale, which is subject to regulatory approvals, consists of Redmond, Wash.-based Lanoga's 320-plus lumber and building product distribution, manufacturing and assembly centers throughout 24 Midwestern and Western states. These operate under several regional banners, reflecting Lanoga's own efforts to consolidate the pro dealer business through acquisitions of its own. They include United Building Centers, Spenard Builders Supply, Home Lumber Co., Dixieline Lumber, and Lanoga's latest purchase, F. E. Wheaton & Co. in the Boston area. Lanoga's dominance west of the Mississippi is seen as a good fit geographically, with the Strober business, which has 91 locations in 15 states in the Northeast and Southeast. They operate under a number of brands, including Strober Building Supply, The Contractor Yard (bought from Lowe's last year), and US Components. The Lanoga purchase is being made through a newly created entity within Fidelity Capital, called Pro-Build Holdings Inc. Strober will move into this new division and, together with Lanoga, create one of America's largest pro dealer groups, with more than 420 locations in 38 states, 14,000-plus employees, and projected 2006 revenues of nearly $5 billion. The transaction does not include Lanoga's real estate, which will be spun out to become an ongoing business enterprise of Laird Norton. Fidelity views the professional home improvement industry as a buoyant one, despite hints that the housing market in the U.S. may be showing signs of flagging. It is also a very quite fragmented industry, says Eileen Newman vice-president communications for Fidelity Capital. As a result, she anticipates further acquisitions by both Lanoga and Strober. "We think it's an attractive industry. We want to continue making investments in it," she says. "Pro-Build is a well-capitalized company and these two pro dealers have the financial clout to survive a downturn in the economy where smaller, less well-financed companies, couldn't."

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Kingfisher CEO will speak at conference during Cologne Fair

COLOGNE, Germany-Education and networking will play an important role in the upcoming International Hardware Fair/Practical World, March 5-7, 2006. The world's largest hardware show will be joined this year by an executive conference of leading European and international retailers. The European DIY-Retail Association, in association with its German member association, the BHB, will host the Practical World Forum, beginning with a networking reception on March 6, followed by a morning program on the 7th. The CEO of Europe's largest DIY retailer will be keynote speaker at the Practical World Forum. Gerry Murphy of Kingfisher in the U.K. will speak about that company's goal to be the best DIY retailer in the world. Also on the program: Murray Armstrong, president and general manager, Ace Hardware International; Frank Loncar, president of Global Sourcing with Lowe's Cos.; and Horst Paulmann, chairman of Easy Home Centers, a major chain in South America. For more info on Practical World, click here . For the Practical World Forum, click here . Or simply contact us here at Hardlines: 416-489-3396.

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