HD Supply Discounts Shares for Huge Secondary Offering

HD Supply Holdings Inc. (NASDAQ: HDS) announced Thursday before the U.S. markets opened that it had priced its secondary offering. The offering was priced at $27.30 to the public on a whopping 40.66 million shares. What should stand out here is that this represents close to 20% of the entire stock coming to market today. The June 2013 IPO raised some $957 million after 53.2 million shares were sold at $18 per share. In short, this is a smaller number of shares, but the higher share price generates proceeds of $1.1 billion or so that are going to the selling holders.

Barclays will act as the sole underwriter for this offering. As of November 2, 2014, the company reported that its outstanding shares numbered at 195.79 million. The company does not currently offer a dividend, nor does it expect to in the foreseeable future, according to the filing.

HD Supply itself will not receive any of the proceeds from this $1.1 billion; only the selling stockholders will. The selling stockholders for the offering are:

  • Carlyle Partners V L.P. and related funds offering 18.29 million shares
  • Clayton, Dubilier & Rice Fund VII L.P. and related funds offering 18.29 million shares
  • THD Holdings LLC offering 8.15 million shares

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HD Supply described itself in the filing as:

We are one of the largest industrial distributors in North America. We believe we have leading positions in the three distinct market sectors in which we specialize: Maintenance, Repair & Operations; Infrastructure & Power; and Specialty Construction. We aspire to be the “First Choice” of customers, associates, suppliers and the communities in which we operate. This aspiration drives our relentless focus and is reflected in the customer and market centricity, speed and precision, intense teamwork, process excellence and trusted relationships that define our culture. We believe this aspiration distinguishes us from other distributors and has created value for our shareholders, driven above market growth and delivered attractive returns on invested capital.

Shares of HD Supply closed Wednesday down 1.6% at $28.23. The reaction in the premarket from the announcement had dropped the share price more than 2% to $27.55 — and the shares were down about 1.8% at $27.72 immediately after the opening bell. The stock has a consensus analyst price target of $33.00 and a 52-week trading range of $20.59 to $30.46. The market cap is about $5 billion.

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