Atlanta—The Home Depot, one of the world's largest home improvement retailers, announced that it will acquire White Cap Construction Supply, Inc., a specialty hardware, tools and materials distributor based in Costa Mesa, Calif., for an undisclosed sum, according to a Home Depot statement.

The agreement is anticipated to close by mid-June, but completion of the transaction is subject to customary conditions. The acquisition itself is part of Home Depot's strategy to expand its professional customer market base.

Said Frank Blake, executive vice president–business development for The Home Depot, "We remain committed to finding new business opportunities for The Home Depot, and this acquisition adds new customer channels and product-selling opportunities. We were attracted to White Cap because of its leadership position in the industry, and because its customers and product lines complement our existing retail business. White Cap represents another step in offering professional customers products and services for the entire construction process."

The total professional contractor market is estimated at $410 billion, and White Cap's estimated annual sales are approximately $500 million. (White Cap is ranked No. 14 in INDUSTRIAL DISTRIBUTION's 2004 Distribution's Big 50 report, based on 2003 sales, see p. 40).

Many in the construction industry were not surprised by the announcement.

"My first reaction to hearing the news was thinking, 'well, it happened,'" said Marshall Jones, owner and president of Marco Supply, a distributorship headquartered in Roanoke, Va. "There were rumors floating around that this is what White Cap wanted…and they got what they wanted.

"White Cap was a strong, well-run company, and it gives Home Depot a platform to continue their market growth. The landscape will change over the next three or four years, and more companies will be acquired. The effect of this on the independent distributor, though, will be hard to gauge.

"As for competing against Home Depot, keep in mind that there are a lot of well-run stores that competed, and continue to compete, against both White Cap and Home Depot. The stores that fail don't fail because of the big stores, but for other reasons."

Industrial Distribution Assn. president Jim Beckstein had similar sentiments.

"From what I read, White Cap has several broad and diverse locations for its construction customers," said Beckstein, president of Mill Supplies, Inc. in Fort Wayne, Ind. "Many of these larger corporations have the ability to round out the offerings for their customers, and [Home Depot] has always had an aggressive approach to the marketplace. [Home Depot] buying a $500 million distributorship is significant. This will have some significant impact on certain areas, such as skill with the product. But I feel, and have always felt, that there will always be a place for the [approximately] $10 million distributor."

Founded in 1976, White Cap operates 70 branch locations throughout the United States, and employs 1,720 people. Approximately 60 percent of White Cap's sales are delivered to the job site, while the remaining 40 percent are purchased at branch locations. The company offers more than 65,000 in-stock products, including hand tools, fasteners, safety equipment, power tools and equipment.

According to the Orange County Register, White Cap officials declined to comment on how the sale would affect the company's 1,720 employees, but a Home Depot official said that White Cap operations would remain as is and projected no layoffs as a result of the sale.

"White Cap is the clear leader in this highly fragmented market, and we're pleased that its leadership team will continue to play an integral role in the organization," said Jim Stoddart, president of The Home Depot Supply, a division of The Home Depot focused on serving business-to-business customers. "We believe this acquisition will be accretive to earnings, and we are most excited about the opportunity it provides for future growth."