Home improvement retailer The Home Depot has emerged as a second suitor for GMS, the specialty building-products distributor already the target of an unsolicited $5 billion cash bid from QXO, according to The Wall Street Journal, which broke the story last Friday. 

The move by Home Depot came one day after QXO offered $95.20 per share for all of GMS, representing roughly a 17% premium over the distributor’s recent trading levels.

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Brad Jacobs’s QXO sent a letter to GMS’s board on June 18, setting a June 24 deadline to enter negotiations and warning that it would take its proposal directly to shareholders if rebuffed. 

GMS, based in Tucker, Ga., confirmed receipt of the QXO proposal and said its board will “carefully review and evaluate” the offer in consultation with its advisers, without commenting further until its review is complete, according to GMS’s Investor Relations webpage.

Home Depot’s undisclosed bid for GMS begins what could spark a bidding war among the industry’s largest players. Home Depot, with a market cap of nearly $345 billion, acquired SRS Distribution for $18.25 billion, which was finalized in June 2024.

GMS operates more than 320 distribution centers and nearly 100 tool sales, rental and service outlets serving both residential and commercial contractors.

Investors eagerly greeted news of competing offers. GMS shares jumped over 27% last Friday on the news, closing at $100.13 in heavy trading and surpassing QXO’s bid on expectations of an escalating auction. 

By contrast, Home Depot shares edged lower amid concerns that such acquisitions could pressure near-term margins and delay the company’s paused share-repurchase program.

Analysts at Truist Securities noted that while "QXO has a history of 'one and done' offers," Home Depot "may be willing to pay a higher multiple" to secure the acquisition, according to AInvest.

Home Depot’s scale and financial firepower differentiate its bid from QXO’s, analysts say. Unlike QXO, which is assembling a digital-first roll-up of regional distributors and recently closed an $11 billion deal for Beacon Roofing Supply, Home Depot brings an established national retail network and direct access to professional contractors through its more than 2,300 stores. 

The home-improvement giant’s ability to leverage its private-label brands and existing logistics infrastructure may allow it to integrate GMS’s product lines more swiftly and extract greater synergies, Reuters reported.

The brewing contest complicates QXO’s strategy at a critical juncture. Jacobs, who has vowed to hit $50 billion in annual revenue within a decade, may be forced to raise his offer or walk away if the GMS board deems Home Depot’s proposal superior. QXO has signaled that $5 billion is its “full offer,” according to Bloomberg News, and it has declined to bid further even after learning of Home Depot’s interest.

As GMS’s board weighs two rival bids, shareholders could benefit from higher offers, industry observers say. But the outcome also hinges on which approach — Home Depot’s proven retail-driven model or QXO’s aggressive roll-up playbook—promises the most value and strategic fit for GMS’s contractor base. 

A decision is expected once the GMS board completes its due diligence process.