Just when it seemed the block/risk business might be waning, Barclays and Credit Suisse stepped up late Wednesday to purchase a US$1.1bn block of shares in industrial distributor HD Supply.
The two banks are re-offering 30.5m shares in HD Supply, representing 15% of outstanding, in a tight marketing range of US$35.50–$35.74, the top end in line with last sale.
Among the sellers are an investment fund associated with Bain Capital and former parent company Home Depot, both of which are selling all of their remaining shares in HD Supply.
Likely to be viewed as a positive by investors, the sell-off removes entirely the sponsor overhang. Last December, private equity firms Carlyle and Clayton Dubilier & Rice, participants alongside Bain in HD Supply’s 2008 buyout, sold all of their remaining stock in a 40.7m-share block trade re-offered at US$27.30 and handled by Barclays alone.
The impressive rally in HD Supply shares, which are up 21% this year, should help the latest sale.
Analysts welcomed HD Supply’s move last week to sell its power solutions business for US$825m to communication products distributor Anixter, saying it removed the former’s lowest margin segment and would improve its balance sheet.
HD Supply is expected to use the proceeds to repay US$675m of 11% notes when they become callable in October 2015, according to Bank of America Merrill Lynch analysts. This will cut forecast end-2016 net debt/Ebitda to 3.8x from 4.1x.
Alongside the sale, HD Supply released second-quarter guidance and affirmed previously disclosed expectations for fiscal year 2015 of about 3% to 4% “end-market growth” and about 300bp growth in excess of the estimated market rise.
HD Supply went public in mid 2013 at US$18 a share and touched a high of US$36.81 on July 16.
