UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement pursuant to Section 14(a) of the Securities
Exchange Act of 1934
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|X| Soliciting Material pursuant to ss.240.14a-12
Hughes Supply, Inc.
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(Name of Registrant as Specified in its Charter)
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(1) Title of each class of securities to which transaction applies:
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THIS FILING CONSISTS OF MATERIALS SENT TO EMPLOYEES REGARDING THE PROPOSED
MERGER.
TO: All Employees
FROM: Tom Morgan, President and CEO
DATE: January 10, 2006
RE: The Home Depot to Acquire Hughes Supply
We are very pleased to announce that our Board of Directors has unanimously
approved a merger agreement with The Home Depot(R), the world's largest home
improvement specialty retailer and the second largest retailer in the United
States. The Home Depot has been focusing in recent years on expanding its
markets beyond the retail channel, acquiring several well-run businesses in the
wholesale distribution market.
This merger will make us part of one of the country's largest and most admired
corporations, and allow us to join forces with other superior distributors that
serve the needs of the professional customer market such as National Waterworks,
White Cap Construction Supply, The Home Depot Supply -MRO Distribution, Apex
Supply and others operating under The Home Depot Supply group of businesses. If
all customary conditions are met, the transaction is expected to close as soon
as possible pending appropriate regulatory and shareholder approval.
You are part of an historic and exciting event for our company. With fiscal 2004
revenues of $73 billion, The Home Depot is the 13th largest public company in
the U.S., providing us with tremendous resources to continue to grow the
business and transform the industry. Combining with The Home Depot Supply
division, we will become the leading diversified distributor of construction,
repair and maintenance-related products in the U.S. with projected 2006 (Hughes'
fiscal 2007) sales approaching $12 billion.
The combination will help us develop greater critical mass in purchasing;
enhance overall operating effectiveness through scale, simplification and
knowledge transfer; and accelerate growth. In addition, Hughes Supply will
continue to be based in Orlando, a decision that I know will be well-received by
our employees and the Central Florida community. This translates into tremendous
growth and advancement opportunities for you, our employees, who are responsible
for bringing us to where we are today.
This merger is a result of our ability to execute our business strategy, our
excellent financial performance, and our deep-rooted customer relationships, but
most importantly, we are being recognized for the commitment and talent of our
people. Thanks to your hard work, dedication and focus, we expect to improve
upon last year's record performance with good momentum as we enter the next
fiscal year. It is more important than ever that we continue to execute and
perform to the best of our abilities. We all understand how disruptive an
announcement such as this can be, but once again, I ask you to remain focused on
your day-to-day responsibilities and continue to demonstrate your commitment to
our customers and to excellence in everything you do.
Naturally, you will have a lot of questions, and we promise to share the answers
with you as soon as we are able. As you can imagine, there are a lot of
decisions to be made over the course of the next several months. However, it is
important to keep in mind that things will not change overnight. Until the
merger receives the necessary regulatory and shareholder approvals, it will be
business as usual and we will continue to execute against the strategy that has
served us so well, led by the current executive team.
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Your management teams will be contacting you in the coming days to share
information, address your questions and gather your feedback. We plan to deliver
frequent updates to keep you aware and informed as events unfold and our company
plans this transition.
I thank you for building an organization that we can all be proud of, one that
is now being recognized on a magnificent scale. We owe our gratitude and our
respect to the Hughes family, to the generations of Hughes employees who have
come before us, and to the current associates throughout our company who have
shown courage and determination in achieving ambitious goals.
Action: Please share this information and the accompanying press release with
all employees as soon as possible.
In connection with the proposed merger, Hughes Supply will file a proxy
statement with the Securities and Exchange Commission. INVESTORS AND SECURITY
HOLDERS ARE ADVISED TO READ THE PROXY STATEMENT WHEN IT BECOMES AVAILABLE,
BECAUSE IT WILL CONTAIN IMPORTANT INFORMATION. Investors and security holders
may obtain a free copy of the proxy statement (when available) and other
documents filed by Hughes Supply at the Securities and Exchange Commission's Web
site at http://www.sec.gov. The proxy statement and such other documents may
also be obtained for free from Hughes Supply by directing such request to Hughes
Supply, Attention: Investor Relations, telephone: (407) 822-2139.
Hughes Supply and its directors, executive officers and other members of its
management and employees may be deemed to be participants in the solicitation of
proxies from its stockholders in connection with the proposed merger.
Information concerning the interests of Hughes Supply's participants in the
solicitation is set forth in Hughes Supply's proxy statement dated April 18,
2005 relating to its 2005 Annual Meeting of Stockholders, previously filed with
the Securities and Exchange Commission, and in the proxy statement relating to
the merger when it becomes available.
The Home Depot at a Glance:
|X| $73 billion in fiscal 2004 sales and net earnings of $5 billion
|X| Assets of $39 billion; Stockholders' equity of $24 billion
|X| Market Capitalization of $85 billion
|X| Founded in 1978, The Home Depot has been public since 1981 and its
common stock trades on the NYSE under the ticker "HD".
|X| It is included in the Dow Jones Industrial Average and the S&P 500
|X| 325,000 Total Employees: 12,000 The Home Depot Supply Employees
|X| We are merging with a Fortune 13 Company, providing us with access to
greater financial and human resources to continue to grow the company and
seize the tremendous opportunities the industry has to offer.
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|X| This is The Home Depot's largest acquisition to date. It more than doubles
the size of the current The Home Depot Supply business with projected 2006
(Hughes' Fiscal Year 2007) combined sales approaching $12 billion.
|X| This transaction is strategically important to The Home Depot as it
strongly reinforces its strategy to expand its markets. Like Hughes, The
Home Depot has invested in businesses, people and technology to build
platforms for growth. By joining forces with The Home Depot Supply, we
create the leading distributor of construction, repair and
maintenance-related products the U.S., merging the best of the best in
terms of people, systems and businesses.
|X| Joining forces with a large and well-capitalized organization will provide
us with sourcing expertise, critical mass in purchasing, greater management
development capabilities and financial resources to continue to grow,
develop the industry, and build an even stronger business and will create
tremendous growth and development opportunities for our people.
|X| Through the hard work and dedication of our employees, we have built a
highly successful organization that we are all justifiably proud of. This
transaction proves that large and admired industry leaders such as The Home
Depot recognize the value of our strategy, our assets, most notably our
people, and see the vast opportunities for continued growth in this market.
|X| Over the past few years, Hughes has been highly successful at implementing
systems, integrating acquired companies and building a flexible
organizational structure that supports growth, while continuing to focus on
our customers' needs and our commitment to superior customer service. The
Home Depot values those achievements and that execution, and over the next
several months, management from both companies will be looking at the best
ways to merge the two businesses and create a world class distributor. In
the meantime, until the transaction is closed, we must continue to operate
the business as usual.
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|X| We have built a strong and successful supply business and we will have a
strong voice in this merger and in the integration process.
In connection with the proposed merger, Hughes Supply will file a proxy
statement with the Securities and Exchange Commission. INVESTORS AND
SECURITY HOLDERS ARE ADVISED TO READ THE PROXY STATEMENT WHEN IT BECOMES
AVAILABLE, BECAUSE IT WILL CONTAIN IMPORTANT INFORMATION. Investors and
security holders may obtain a free copy of the proxy statement (when
available) and other documents filed by Hughes Supply at the Securities and
Exchange Commission's Web site at http://www.sec.gov. The proxy statement
and such other documents may also be obtained for free from Hughes Supply
by directing such request to Hughes Supply, Attention: Investor Relations,
telephone: (407) 822-2139.
Hughes Supply and its directors, executive officers and other members of
its management and employees may be deemed to be participants in the
solicitation of proxies from its stockholders in connection with the
proposed merger. Information concerning the interests of Hughes Supply's
participants in the solicitation is set forth in Hughes Supply's proxy
statement dated April 18, 2005 relating to its 2005 Annual Meeting of
Stockholders, previously filed with the Securities and Exchange Commission,
and in the proxy statement relating to the merger when it becomes
available.
STRATEGIC ALTERNATIVES PROCESS
1. DID THIS MERGER AGREEMENT WITH THE HOME DEPOT RESULT FROM THE BOARD'S
REVIEW OF STRATEGIC ALTERNATIVES?
Yes, this is a result of the Board's review of strategic alternatives.
On October 31, we announced that The Board of Directors formed a
Special Committee which in turn, hired a financial advisor to help it
review the Company's current business plan and evaluate opportunities
to realize the Company's potential and to enhance shareholder value.
2. WHY DID THE COMPANY CHOOSE TO SELL TO THE HOME DEPOT?
As we stated in the strategic alternatives announcement, Hughes has
been performing very well, growing sales, improving profitability and
executing its strategy. In addition, we have an enviable market
position and product portfolio, but the landscape of the industry is
changing rapidly. With larger and well-capitalized players entering
the industry, the Board felt that acting from a position of strength
it was an appropriate time to evaluate all strategic alternatives.
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The Home Depot is a market leader and possesses a wealth of resources
to thrive in an industry where there are still tremendous
opportunities for growth. The combination with The Home Depot Supply
is positive for all of our constituents, creating significant
shareholder value, increasing the opportunities available to our
employees, continuing our commitment to superior service to customers,
building on the foundation of strong vendor relationships and creating
a market leader in the wholesale supply business.
TIMELINE
3. WHAT IS THE APPROVAL PROCESS FOR THE MERGER AND THE ASSOCIATED
TIMELINE?
The merger agreement is subject to regulatory and shareholder
approval. Within the first few days of signing the merger agreement,
the companies will file the necessary documents with the Department of
Justice to gain regulatory (Hart-Scott-Rodino) approval. In addition,
the Hughes Supply Board of Directors will recommend to shareholders
that they approve the merger through a special vote and meeting of
shareholders. After regulatory clearance and shareholder approval are
obtained, the merger is declared effective and the transaction closes.
4. WHAT HAPPENS BETWEEN NOW AND THEN?
Until the transaction closes, it will be business as usual and we
should continue to execute the business plan that has served us so
well. It is critically important that we remain focused on our
day-to-day responsibilities and that we all continue to perform to the
best of our abilities. We should continue to serve our customers and
all our constituents with the same level of superior service they have
come to expect from Hughes.
5. WHAT WILL HAPPEN TO ME AND MY JOB?
You must keep in mind that our most important, most valuable assets
are our employees. Our people are what make this company great and we
are being recognized for their commitment and talent. It is too early
to determine what, if any, changes may occur to specific jobs. Until
the transaction closes, it will be business as usual and it is
critically important that we remain focused on our day-to-day
responsibilities and that we all continue to perform to the best of
our abilities.
6. HOW WILL THE TWO COMPANIES BE INTEGRATED AND HOW LONG WILL THE
INTEGRATION PROCESS TAKE?
While it is too early to know the exact process, a cross-functional
team from both companies will work to integrate operations to develop
the best combined pro business. The length of time it will take to
fully integrate the two organizations cannot be determined at this
time. This merger involves two very large supply organizations coming
together.
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LEADERSHIP
7. WILL SENIOR EXECUTIVES STAY?
The current Hughes senior executive leadership is expected to remain
intact until the transaction closes. While there may be changes after
the closing, those have not been determined and we will continue to
operate as planned until that time.
8. WHO WILL LEAD THE COMBINED ORGANIZATION?
The current Hughes senior executive leadership is expected to remain
intact until the transaction closes. After the closing, Tom Morgan
will be leaving Hughes and Joe DeAngelo, executive vice president, The
Home Depot Supply, will lead the combined organization.
HUMAN RESOURCES / BENEFITS
9. WILL OUR EMPLOYEE BENEFITS CHANGE?
Until the transaction closes, Hughes employees will continue under the
existing health and welfare plans in which they have enrolled. The
401(k) recordkeeper transition to Fidelity will proceed and employees
will continue to participate in the 401(k) plan until the transaction
is closed. Employees can then roll existing 401(k) funds into a
separate IRA or into The Home Depot 401(k) Plan.
10. WILL THERE BE LAYOFFS?
We cannot predict the future or guarantee a reduction in force will
not happen. We can state that the new company cannot be successful
without our employees and we believe this translates into tremendous
growth and advancement opportunities for our employees. Remember, this
merger is about creating a larger company capable of capturing more
business with existing and new customers.
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11. WILL THIS TRIGGER A CHANGE IN CONTROL? WHAT HAPPENS TO MY STOCK, OR
OPTIONS, OR 401(K) PLAN SHARES?
When the merger transaction is closed, a change of control will take
place. At that time, any equity; e.g., restricted shares, performance
based restricted shares and options, will be cashed out. A trust will
be established to manage the distribution of the equity proceeds. The
proceeds from the stock in the 401(k) plan will be reallocated across
your other investment options.
BUSINESS
12. WHAT IS THE DIFFERENCE BETWEEN THE HOME DEPOT AND THE HOME DEPOT
SUPPLY?
The Home Depot is the world's largest home improvement specialty
retailer and the second largest retailer in the United States. The
Home Depot is best known for its signature "orange box" store, but
they also operate several specialty subsidiaries, including The Home
Depot Supply which provides products and services to the professional
customer. The Home Depot Supply offers customized solutions that
target and meet the evolving needs of specific professional customers
involved in residential construction, commercial construction and
facility maintenance.
The Home Depot Supply operates the following distinct business units:
|X| CREATIVE TOUCH INTERIORS (CTI) - a premier design center partner
to national, regional and local production home builders.
|X| THE HOME DEPOT SUPPLY, MRO DISTRIBUTION - a leading supplier of
maintenance, repair and operations (MRO) products to owners and
managers of multifamily, hospitality, educational and commercial
properties; healthcare providers; and municipal and government
facilities.
|X| WHITE CAP CONSTRUCTION SUPPLY INC. - a leading distributor of
specialty hardware, tools and materials targeting large- and
medium-sized construction contractors.
|X| APEX SUPPLY - provides plumbing, HVAC and industrial products to
a variety of trade professionals across the Southeast United
States.
|X| CONTRACTORS' WAREHOUSE - a recognized cash and carry professional
supplier catering to the specialty heavy "handyman" and light
remodeler, a key, fast growing, professional customer segment.
|X| WILLIAMS BROS. LUMBER COMPANY - the country's fourteenth largest
provider of building materials to the professional contractor.
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|X| UTILITY SUPPLY OF AMERICA (USABlueBook) - a leading national
distributor of maintenance, repair and operations (MRO) supplies
to the water and wastewater treatment industry.
|X| BRAFASCO - a leading supplier of fasteners and industrial
supplies to the Canadian market.
|X| NATIONAL WATERWORKS - a leading distributor of critical products
used to build, repair and maintain water and wastewater
transmission systems in the United States.
13. WILL THE HOME DEPOT KEEP THE HUGHES ORGANIZATION INTACT, SELL CERTAIN
BUSINESSES OR INTEGRATE THEM INTO THE HOME DEPOT SUPPLY?
Hughes will be combined with The Home Depot Supply division which
includes respected names such as National Waterworks, White Cap
Construction Supply, The Home Depot Supply -MRO Distribution, Apex
Supply and other businesses that serve professionals in residential
and commercial construction and facilities maintenance.
14. WILL THERE BE BRANCH CLOSURES AS A RESULT OF THE MERGER?
Until the transaction closes, it will be business as usual, which may
include previously planned branch closures. After the transaction
closes, management from both companies will be looking at the best
ways to merge the two businesses, become more efficient and create a
world class distribution company. In addition, there may be
overlapping business presence in certain markets which may require the
closing of certain branches.
15. WILL HUGHES SUPPLY CONTINUE TO BE BASED IN ORLANDO?
Yes, plans are to keep the Hughes Supply operation in Orlando.
16. WILL WE KEEP OUR CURRENT OPERATING SYSTEMS, ECLIPSE AND SX.E?
The current thinking is that the combined Hughes Supply and The Home
Depot Supply businesses will be on the Hughes Unified operating
platform. Hughes has invested a significant amount of financial and
human resources in the development and deployment of its Hughes
Unified operating platform. And while many of The Home Depot Supply
businesses are not on similar systems, through an integrated server,
it is now possible to have a common view across businesses, despite
different operating systems.
17. WILL WE CHANGE OUR NAME TO THE HOME DEPOT SUPPLY?
There are no immediate plans to change the name of our company. While
the long-term plan has not yet been determined, it is important to
note that many of the other companies that are now part of The Home
Depot Supply group of businesses (National Waterworks, White Cap
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Construction Supply, Apex Supply, Williams Brothers Lumber Company)
continue to operate under their previous names. Rest assured that much
consideration will be given to the significant brand equity built into
the Hughes Supply name.
18. WHAT PLANS DOES THE HOME DEPOT HAVE FOR THE BUSINESSES?
After the transaction is closed, The Home Depot will lead the process
of determining the going-forward business plan for the combined
businesses. However, Hughes has been highly successful over the last
few years at implementing systems, integrating acquired companies and
building a flexible organizational structure that supports growth,
while continuing to focus on our customers' needs and our commitment
to superior customer service. The Home Depot values these achievements
and the execution, and over the next several months, management from
both companies will be looking at the best ways to merge the two
businesses and create a world class distributor. We have built a
strong and successful business and we will have a strong voice in this
merger and in the integration process.
HUGHES SUPPLY STOCK
19. WHAT WILL HAPPEN TO HUG STOCK?
Upon regulatory and shareholder approval, after the transaction
closes, Hughes Supply common stock will be de-listed from the New York
Stock exchange. Shareholders will be required to turn in their stock
certificates and will receive cash in exchange for their shares of
Hughes Supply stock.
20. IS THIS A DONE DEAL?
Until the transaction closes, it is not a done deal. While we have
signed a definitive agreement, until the transaction closes, the
possibility exists that another strategic or financial buyer could
step in and outbid The Home Depot's current offer, or that government
regulatory approval becomes problematic.
Customers and Vendors
21. WHAT SHOULD I SAY IF I AM ASKED BY A CUSTOMER OR VENDOR ABOUT THE
ANNOUNCEMENT?
In the coming weeks and as this process unfolds, we will be providing
you with information to share with customers and vendors detailing the
merits of this combination. In the short-term, the announcement should
have no impact on our day-to-day business operations. Until the
transaction closes, we must remain focused on running the business as
usual.
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For customers: Our relationship with you remains unchanged. We will
continue to provide you with the superior service and performance that
you have come to expect from Hughes.
For vendors: Our relationship with you remains unchanged. We will
continue to work diligently with you to serve our mutual customers
with the superior products and service that they have come to expect
from Hughes.
In connection with the proposed merger, Hughes Supply will file a proxy
statement with the Securities and Exchange Commission. INVESTORS AND SECURITY
HOLDERS ARE ADVISED TO READ THE PROXY STATEMENT WHEN IT BECOMES AVAILABLE,
BECAUSE IT WILL CONTAIN IMPORTANT INFORMATION. Investors and security holders
may obtain a free copy of the proxy statement (when available) and other
documents filed by Hughes Supply at the Securities and Exchange Commission's Web
site at http://www.sec.gov. The proxy statement and such other documents may
also be obtained for free from Hughes Supply by directing such request to Hughes
Supply, Attention: Investor Relations, telephone: (407) 822-2139.
Hughes Supply and its directors, executive officers and other members of its
management and employees may be deemed to be participants in the solicitation of
proxies from its stockholders in connection with the proposed merger.
Information concerning the interests of Hughes Supply's participants in the
solicitation is set forth in Hughes Supply's proxy statement dated April 18,
2005 relating to its 2005 Annual Meeting of Stockholders, previously filed with
the Securities and Exchange Commission, and in the proxy statement relating to
the merger when it becomes available.
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