Home Depot to sell unit for less than original bid
The $8.5 billion deal for the wholesale business is $1.8 billion lower. Credit and housing woes were cited.
ATLANTA - The Home Depot Inc. said yesterday that it had 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, announced in June, even at a lower price.
The initial sale price 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 buy 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, which serves construction contractors.
The sale is scheduled to take place tomorrow.
"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 officer of Home Depot, the world's biggest home-improvement-store chain.
"We are now focused on our retail business," he said.
The buyers of HD Supply include affiliates of Bain Capital Partners L.L.C., the Carlyle Group, and Clayton, Dubilier & Rice Inc.
Home Depot said it expected to net about $7.9 billion in cash from the sale.
Company spokeswoman Paula Drake said Home Depot would likely 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 & Co. Inc. analyst David Schick said in a research report yesterday that the sale by Home Depot "is a notable achievement" considering the slump in home construction and the 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 3 cents yesterday to $35.05.