Home Depot Acquires Interline for $1.63 Billion in Bid to Bolster MRO Business

In a move to bolster its business with the professional customers who already account for roughly one-third of its $83.2 billion in annual sales , Home Depot, Atlanta, has signed a definitive agreement to acquire Jacksonville, Fla.-based Interline Brands, Inc., a national distributor and direct marketer of maintenance, repair and operations (MRO) products that has 90 locations throughout  the United States, Canada and Mexico.

Interline has a major focus on  servicing the multi-family residential and institutional MRO markets and an interesting overall mix of business. According to its 4Q 2014 financial data, its key customers segments are institutional (50%); multi-family (30%); and residential (20%). The company’s institutional mix of business that accounts for half of its sales includes the educational, health-care and property markets. Its MRO product mix is janitorial/sanitation (45%), plumbing (18%), hardware (9%), HVAC (8%), appliances (6%), electrical (5%), security (4%) and other products (5%).

Along with selling electrical products  under its new SupplyWorks brand, the company also sells some electrical products under private brands, including AF Lighting (residential lighting products),  and Preferred Industries (shelf-good items including wiring devices, boxes, connectors and wall plates).

The purchase of Interline Brands will no doubt pit Home Depot against W.W. Grainger Inc., Lake Forest, Ill., in servicing institutional and multi-family residential accounts. While Grainger is an acknowledged master of online sales in the distribution space and www.grainger.com  accounted for 36% of the company’s 2014 annual sales, e-business accounts for a relatively small although rapidly growing proportion of sales for Home Depot. According to information in Home Depot’s most recent annual report, online sales increased 36.9% from 2013 to 2014 and represented approximately 4.5% of the company’s total.

Interline Brands has a higher percentage of online sales to offer Home Depot. According to the company’s most recent financial report, e-biz accounts for 20% of sales and the company was ranked as one of the 100 largest e-commerce merchants by Internet Retailer. Grainger is ranked #13 in that listing.

Earlier this year, Interline Brands announced the launch of SupplyWorks as a new national brand, combining five of its largest brands —  AmSan, CleanSource, JanPak, Trayco and Sexauer — under one brand that it said will account for more than $850 million in annual revenue. Electrical products are part of a SupplyWorks package of over 140,000 products that includes hardware, plumbing, HVAC (heating, ventilating and air conditioning products), janitorial, security and cleaning supplies, and other maintenance and repair products.

Craig Menear, chairman, CEO and president of The Home Depot, said in the press release that pro customers are a top priority. “Interline is a well-run company that has achieved impressive financial results over the last few years. With their seasoned leadership team, we will enhance our ability to serve the pro — both in the store and at any desired location outside of the store — driving significant value for our customers and shareholders.”

Under the terms of the agreement, Home Depot will acquire Interline Brands for $1.63 billion in cash, subject to customary adjustments. The acquisition, which has been approved by the shareholders of Interline Brands, is expected to be completed by Nov. 1.