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HD Supply Acquisition | 12 Months Ended
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Jan. 30, 2022
Business Combinations [Abstract] |
HD Supply Acquisition | HD SUPPLY ACQUISITION On November 16, 2020, we announced that we entered into a definitive agreement to acquire HD Supply, a leading national distributor of MRO products to multifamily, hospitality, healthcare, and government housing facilities, among others. We believe the acquisition of HD Supply will help position the Company to accelerate sales growth by better serving both existing and new MRO customers. Under the terms of the merger agreement, a subsidiary of Home Depot made a cash tender offer to purchase all outstanding shares of HD Supply common stock for $56 per share. All of the conditions of the offer were satisfied, and the acquisition was completed on December 24, 2020. The acquisition was funded through cash on hand, a portion of which was replaced with the proceeds from our issuance of $3.0 billion of senior notes in January 2021. The acquisition was accounted for in accordance with Accounting Standards Codification Topic 805 "Business Combinations" and, accordingly, HD Supply’s results of operations have been consolidated in the Company’s financial statements since December 24, 2020, the date of acquisition. We recorded a preliminary allocation of the purchase price to assets acquired and liabilities assumed based on their estimated fair values as of December 24, 2020. Adjustments to our preliminary purchase price allocation recognized in fiscal 2021 were immaterial, and our purchase price allocation is now finalized. Acquisition-related costs were expensed as incurred and totaled $110 million in fiscal 2020, including the $56 million charge related to the settlement of stock-based awards noted below. The following table summarizes total purchase consideration:
in millions |
Total cash consideration for outstanding shares | $ | 8,637 |
Value of stock-based awards attributed to services already rendered (1) | 55 |
Total purchase consideration | $ | 8,692 |
————— (1) In connection with the completion of the acquisition, all HD Supply stock-based awards were cash settled for an aggregate value of $111 million. As the settlement of the awards was at the discretion of the Company, the portion of the fair value of the awards attributed to services previously provided of $55 million was included as part of purchase consideration, with the remaining $56 million recognized as post-combination expense within SG&A in our consolidated statement of earnings for fiscal 2020. The following table summarizes the recorded fair values of the assets acquired and liabilities assumed:
in millions | Fair Value
Cash | $ | 912 |
Other current assets | 879 |
Goodwill | 4,872 |
Other assets (1) | 3,936 |
Total assets acquired | $ | 10,599 |
Current liabilities | $ | 817 |
Long-term liabilities (2) | 1,090 |
Total liabilities assumed | $ | 1,907 |
————— (1) Includes identifiable intangible assets of $3.3 billion. (2) Includes deferred tax liabilities of $815 million primarily resulting from the difference in book and tax basis related to identifiable intangible assets. The fair value of identifiable intangible assets was determined by using certain estimates and assumptions that are not observable in the market. The fair values were determined using an income based approach, which included significant assumptions such as the amount and timing of projected cash flows, growth rates, customer attrition rates, discount rates, and the assessment of the asset’s life cycle. The fair value and estimated useful lives of identifiable intangible assets follows:
in millions | Useful Life (Years) |  | Fair Value
Customer relationships | 19 |  | $ | 2,630 |
Trade name – indefinite lived | Indefinite |  | 520 |
Trade names – definite lived | 20 |  | 150 |
Total identifiable intangible assets |  |  | $ | 3,300 |
The goodwill arising from the acquisition is primarily attributable to operational synergies and acceleration of growth strategy, as well as the assembled workforce. The goodwill generated in the acquisition is not expected to be deductible for U.S. federal and state tax purposes. Net sales and net earnings for fiscal 2020 attributable to HD Supply after the completion of the acquisition were immaterial. Pro forma results of operations would not be materially different as a result of the acquisition and therefore are not presented.

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
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