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Home Depot says supply division being sold for reduced price of $8.5B, deal to close Thursday

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Posted: August 28, 2007 7:04 p.m.
Updated: September 12, 2007 5:00 a.m.
    ATLANTA — The Home Depot Inc. said Tuesday it has agreed to sell its wholesale distribution business to private equity groups for $8.5 billion — about $1.8 billion less than originally agreed.
    The announcement comes after several days of intense negotiations to preserve the deal, even at a lower price.
    The sale price as announced in June was $10.3 billion. But tightening credit conditions and a rocky housing market led to renegotiation.
    As part of the amended terms, Home Depot will purchase a 12.5 percent equity interest in the whole business for $325 million and will guarantee a $1 billion senior secured loan of HD Supply, a business that serves construction contractors.
    The sale is scheduled to take place on Thursday.
    ‘‘Despite the softness in the financing and residential construction markets, the terms of the HD Supply sale deliver shareholder value today and in the future as we will share in HD Supply’s upside potential,’’ said Frank Blake, chairman and chief executive of Home Depot, the world’s biggest home improvement store chain.
    ‘‘We are now focused on our retail business,’’ he said.
    The buyers include affiliates of Bain Capital Partners, the Carlyle Group and Clayton, Dubilier & Rice.
    Home Depot said it expects to net approximately $7.9 billion in cash proceeds from the sale.
    Company spokeswoman Paula Drake said Home Depot plans to go ahead with a planned stock buyback.
    ‘‘We are committed to the $22.5 billion recapitalization, which will be completed as soon as practicable,’’ Drake said.
    Stifel, Nicolaus & Company analyst David Schick said in a research report Tuesday the sale by Home Depot ‘‘is a notable achievement’’ considering the slump in home construction and troubled credit market.
    ‘‘The sale of the HD Supply business, though for a lower price, should be viewed favorably,’’ Schick wrote.
    Investors, happy to see the deal completed, bid Home Depot shares up 2 cents to $35.05 Tuesday.
    ———
    Associated Press Reporter Russ Bynum in Savannah contributed to this story.

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