Atlanta, GA, Dec. 3--Recurrent rumors resurfaced Tuesday that Home Depot is interested in acquiring London-based home improvement retailer Kingfisher PLC, and the speculation fueled a rise in Kingfisher's stock.
The Atlanta Journal-Constitution reported that shares of Kingfisher, which owns the B&Q and Castorama do-it-yourself chains in Europe, increased 3 percent in early trading Tuesday amid speculation about a possible hookup with Atlanta-based Home Depot. Kingfisher shares, which are traded on the London Stock Exchange, closed Tuesday 2.7 percent higher.
Aside from a 2 percent increase in Kingfisher stock the day before, there was no apparent reason that speculation about an acquisition resurfaced Tuesday.
"We haven't seen or heard anything new on it," said Michael Baker, a Deutsche Bank Securities analyst in Massachusetts. Baker believes that a purchase of Kingfisher by Home Depot would make sense in the future.
The prospect of overseas expansion comes as Home Depot battles the perception that the U.S. home improvement market is near saturation. At the same time, archrival Lowe's is moving into metropolitan areas once dominated by Home Depot.
Speculation that Home Depot might acquire Kingfisher picked up steam in July when Home Depot Chairman and Chief Executive Officer Bob Nardelli met with Kingfisher CEO Gerry Murphy in the United States.
Nardelli said they discussed their companies' best practices.
Home Depot declined to comment Tuesday, citing a company policy about not responding to rumors and speculation. At Kingfisher headquarters in London, spokesman Nigel Cope also declined to comment.
But that didn't stop London investors from considering what could occur if Home Depot acquires Kingfisher. Kingfisher has 550 stores in Europe and the Far East, including 320 B&Q Warehouse stores in Britain. In France, Kingfisher operates 105 Castorama stores and 57 Brico Depot locations.
Deutsche Bank's Baker said that buying Kingfisher would quell investors' worries that Home Depot's growth opportunities in the United States may be drying up.
"We do not believe a deal is currently in the works between (Home Depot) and Kingfisher, but longer term we can see the rationale for a hookup between the two," Baker wrote in a recent report. "We believe the primary driver to a potential combination would be (Home Depot's) lack of compelling growth opportunities in the U.S. as the potential for additional 'orange boxes' inevitably slows."
Home Depot has discussed, in general terms, possible expansion outside North America, where it has stores in the United States, Canada and Mexico.
Should Home Depot decide to establish a foothold on second and third continents, it probably would do so by acquisition in Europe and by "green-field," or ground-up, development in Asia, Nardelli said in August.
"Just like the move into Mexico, whether it's in Europe or Asia, or more in Mexico, it is going to be a market-driven -- it is going to be a financially evaluated -- decision," Nardelli said then.
