The Home Depot (Atlanta) unexpectedly re-routed its international expansion plans with the purchase of Mexico's second-largest home retailer, Total Home, a four-store chain owned by Mexican industrial conglomerate Alfa S.A. Terms weren't disclosed, but one estimate pegged the transaction at $50 million cash. The acquisition is expected to close in five to six weeks.
Three of the four Total Home stores are in Monterrey and one is in Mexico City. The stores are about 80,000 square feet each and carry about 30,000 products — about two-thirds the size of a typical Home Depot. The sites in Monterrey are about a two-hour drive from Home Depot's closest existing store, in Laredo, Texas.
Once the acquisition is complete, Total Home will become a wholly owned subsidiary of Home Depot and the four stores will change to the Home Depot banner. The company will renovate the stores in the Home Depot warehouse format. The current Total Home management will continue to operate the four stores, but will report to Anders Moberg, Home Depot's division president, international.
Home Depot already has an international presence, with 67 stores in Canada, five in Chile and three in Argentina, and has made no secret of its desire for further international expansion. But analysts had generally expected the retailer to concentrate further expansion in South America and begin looking at Europe. However, analyst Wayne Hood of Prudential Securities calls this is “a logical extension for Home Depot, because its stores in Texas have been productive and there should be a fair degree of overlap in the products in Texas with the products in Mexico.” Home Depot operates 94 stores in Texas and already advertises in northern Mexico.
“There are a lot of Mexican consumers who are familiar with Home Depot and have shopped on the other side of border,” said Moberg. “They're used to the concept.” Moberg declined to say whether Home Depot is looking at more acquisitions in Mexico or if the retailer is considering building its own stores there.