Private equity firm Clayton, Dubilier & Rice (CD&R) has agreed to acquire the Waterworks business unit of North American industrial distributor HD Supply for $2.5bn.

Waterworks is all set to become an independent company post acquisition and will be completely owned by CD&R.

Headquartered in St. Louis, Missouri, Waterworks distributes industrial and construction products used for building and maintaining infrastructure networks related to underground water, wastewater and drainage.

It is considered to be the largest distributor of water, sewer, storm and fire protection products in the US, and has a network of 244 branches across 46 states. Post acquisition, it will continue to operate from its existing headquarters.

CD&R Partner J.L. Zrebiec said: "Waterworks represents an attractive opportunity to invest in the leading distributor in the U.S. waterworks market, which stands to benefit from tailwinds in construction activity and municipal infrastructure spending.

"With strong national, regional and local positions and a reputation for customer service and reliability, the company is in a very favorable long-term position."

One of the partners in CD&R, Jim Berges, who was also a former chairman of HD Supply, has been named as the chairman of Waterworks.

On the other hand, the incumbent president of Waterworks, Steve LeClair has been elevated as its CEO.

According to HD Supply chairman, president & CEO Joe DeAngelo, divesting the Waterworks business is in the best interests of HD’s stakeholders and also for the employees of Waterworks.

DeAngelo added: "This significant strategic transaction will further simplify and focus HD Supply on our highest value creation opportunities, accelerate debt reduction, create additional cash to enable next generation growth investments and innovation as well as return cash to HD Supply stockholders."

Subject to customary regulatory approvals, the acquisition is likely to be completed in the third fiscal quarter of HD Supply's fiscal year.