ATLANTA — HD Supply Holdings, Inc. announced its intention to separate its Facilities Maintenance and Construction & Industrial businesses into two independent publicly traded companies through a distribution, which is expected to be tax-free to HD Supply shareholders for U.S. tax purposes. The separation is expected to be completed by the middle of fiscal 2020.
“After years of growth, Facilities Maintenance and Construction & Industrial have achieved sufficient scale to operate as independent companies,” said Joe DeAngelo, Chairman and CEO, HD Supply. “Each business is now positioned as a leader in its respective market and has the ability to enhance its competitive advantage by further differentiating its best-in-class customer service through additional focus.”
Benefits of Separation
Both Facilities Maintenance and Construction & Industrial are leaders in their respective industries today and operate largely as independent companies given the lack of customer and operational overlap. Following completion of the separation, each company is expected to be well-capitalized, generate strong free cash flow and be well-positioned for future growth. HD Supply believes that as two independent companies, each business will be better able to:
- Position itself within its industry as a focused, independent company
- Pursue both organic growth and acquisition opportunities aligned with its strategic priorities
- Create a more optimal capital structure and capital allocation consistent with its own independent financial profile
- Align incentive compensation with financial performance
Facilities Maintenance
A leading Maintenance, Repair and Operations solution provider, the Facilities Maintenance business will continue to focus on providing MRO products, value-add services and custom products to multifamily, hospitality, healthcare and institutional property owners and managers. Facilities Maintenance operates a distribution center-based model and sells its products primarily through a professional sales force, e-commerce and print catalogs. The company intends to retain the HD Supply name and ticker symbol. HD Supply Facilities Maintenance generated approximately $3 billion in Net sales in fiscal 2018, ended February 3, 2019.
DeAngelo, Chairman and CEO, HD Supply, is expected to serve as Chairman and CEO, HD Supply Facilities Maintenance; Evan Levitt, currently CFO and Chief Administrative Officer of HD Supply, is expected to serve in the same capacity for HD Supply Facilities Maintenance; and Brad Paulsen, currently President of Facilities Maintenance, is also expected to serve in the same capacity after the separation.
Construction & Industrial
Construction & Industrial-White Cap business will continue to serve as a one-stop-shop providing concrete accessories and chemicals, tools and equipment, building materials and fasteners, erosion and waterproofing, and safety products to professional contractors by meeting their distinct and customized supply needs in non-residential, residential and industrial applications. Construction & Industrial generated approximately $3 billion in Net sales in fiscal 2018, ended February 3, 2019.
John Stegeman, currently President of Construction & Industrial, is expected to serve as CEO, and Alan Sollenberger, currently Chief Operating Officer of Construction & Industrial, is expected to serve in the same capacity after the separation.
Management and Governance
Upon completion of the separation, each company will have its own management team and an independent board of directors that will include members of the current HD Supply Board of Directors. Additions to the management teams and members of the boards of directors for both companies will be named in the months leading up to the formal separation.
Transaction Details, Conditions, and Timing to Close
Upon completion of the separation, each company is expected to be publicly listed and traded on a nationally recognized stock exchange. Both companies are expected to remain headquartered in Atlanta, GA.
The transaction is subject to certain customary conditions, including, among others, final approval by HD Supply’s Board of Directors and the effectiveness of a Form 10 registration statement to be filed with the U.S. Securities and Exchange Commission (“SEC”). The separation is not subject to shareholder approval.