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HD Supply fairly valued after split news, William Blair says in downgrade.

William Blair analyst Ryan Merkel last night downgraded HD Supply Holdings to Market Perform from Outperform after the company announced its intention to separate its Facilities Maintenance and Construction & Industrial businesses into two independent publicly traded companies. The shares, following the post-news rally, appear to be discounting a Facilities Maintenance sale near 12 times EBITDA in mid-2020, Merkel writes in a research note to investors. However, the analyst lacks confidence that a sale "happens anytime soon," and believes Construction & Industrial is unlikely to be sold near term due to "very limited" strategic buyers and cycle risks. He finds HD Supply "fully valued" at around $39 per share. Barclays analyst Julian Mitchell this morning also downgraded HD Supply Holdings to Equal Weight from Overweight. The stock in morning trading is down 2% to $38.30.

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Publication:The Fly
Date:Sep 26, 2019
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