Atlanta, GA-based HD Supply — No. 6 on Industrial Distribution's Big 50 List — on Tuesday announced the sale of its Waterworks unit to a private investment firm, and reported its 2017 Q1 fiscal results.
HD Supply said it has entered into an agreement to sell Waterworks — which the company hails as the nation's largest distributor of water, sewer, storm and fire protection products — to Clayton, Dubilier & Rice for a price of $2.5 billion. The transaction is expected to close in HD Supply's Q3, pending regulatory approvals.
"After a detailed evaluation, we determined that a sale of our Waterworks business unit to Clayton, Dubilier & Rice is in the best interests of our Waterworks associates and HD Supply stockholders," said Joe DeAngelo, HD Supply chairman, president & CEO. "This significant strategic transaction will further simplify and focus HD Supply on our highest value creation opportunities, accelerate debt reduction, create additional cash to enable next generation growth investments and innovation as well as return cash to HD Supply stockholders."
The divestment will leave HD Supply with two business units: Facilities Maintenance and Construction & Industrial. It follows the company's two other divestments over the past two years of Interior Solutions in 2016, and Power Solutions in 2015.
Reports that HD Supply was looking to sell its Waterworks unit first surfaced in early February.
Also on Tuesday, HD Supply announced that effective immediately, Will Stengel will assume the role of president & CEO of Facilities Maintenance. Stengel most recently served as the unit's senior vice president and COO, and has been with the company for over 10 years in various commercial, operations and strategy roles.
Founded in 1978, Clayton, Dubilier & Rice is a private investment firm that has managed the investment of more than $22 billion in 72 companies representing a broad range of industries with an aggregate transaction value of more than $100 billion. The firm has offices in New York and London.
For the quarter ended April 30, HD Supply posted Q1 sales of $1.87 billion, up 5.2 percent year-over-year. The company had a total profit of $85 million, a $99 million improvement from a $15 million loss a year earlier. Adjusted total profit of $127 million increased 23.3 percent. Operating profit of $176 million decreased 1.1 percent, while gross profit of $631 million increased 3.6 percent.
By business unit in Q1:
- Facilities Maintenance sales of $682 million increased 0.7 percent year-over-year, with adjusted EBITDA decreasing 12.7 percent to $117 million.
- Waterworks sales of $657 million increased 8.6 percent year-over-year, with adjusted EBITDA increasing 6.3 percent to $51 million.
- Construction & Industrial sales of $536 million increased 7.0 percent, with adjusted EBITDA increasing 12.2 percent to $55 million.
By month in Q1:
- February sales were $535 million, with average daily sales growth of 6.4 percent year-over-year
- March sales were $579 million, with average daily sales growth of 5.3 percent
- April sales were $759 million. with average daily sales growth of 4.2 percent
Preliminary May sales were approximately $641 million, with average daily sales growth of 5.1 percent. Excluding Waterworks, preliminary May sales were approximately $411 million, with average daily sales growth of 6.9 percent.
Preliminary May daily sales growth by business unit was (approximately):
- Facilities Maintenance up 5.2 percent
- Waterworks up 2.1 percent
- Construction & Industrial up 9.3 percent