Home Depot Inc. has agreed to sell its supply
division to three private-equity firms in a roughly $10 billion deal, sources
told Reuters News Agency today.
Home Depot Inc. has agreed to sell
its supply division to three private-equity firms in a roughly $10 billion
deal, Reuters News Agency reported today.
Bain Capital, Carlyle Group and
Clayton, Dubilier & Rice won the auction and were finalizing the deal
earlier today, sources close to the process told Reuters.
HD Supply, which sells building
materials, waste water and utility products to municipalities and contractors,
was put up for sale earlier this year, with investment bank Lehman Brothers
overseeing the auction.
Several groups of private-equity
firms showed initial interest in the unit, but backed away late in the process
as the slowdown in the U.S. housing market hurt the business, sources involved
with the auction previously told Reuters.
The winning bidders topped a rival
offer from a team consisting of Thomas H. Lee Partners and CCMP Capital,
according toThe New York Times.
The sale price of about $10 billion
was somewhat lower than investors and analysts had expected,Keith
Davis, an analyst with Farr Miller Washington, told Reuters.
“Home Depot may be taking a bit of a
price concession,” Davis said. “They are kind of selling at a bad time. They
believe that shareholders would rather see them get it done.”
By selling HD Supply and focusing on
the retail stores, Home Depot is repudiating former CEORobert
Nardelli's efforts to expand the unit.
The company launched the supply
business in 1997 and expanded it by acquiring companies like water and sewer
products supplier National Waterworks Holdings in 2005 and paying $3.2 billion
for Hughes Supply in 2006.
Clayton, Dubilier & Rice had
been among the final bidders for Hughes Supply, but it lost to Home Depot,
sources previously told Reuters. Buying HD Supply would allow the
private-equity firm to reclaim Hughes, as well as other distribution assets.
“When the market was really strong,
Home Depot viewed the supply business as a way to diversify,” Farr Miller's
Davis said. “Now people think it makes sense to get back to basics and focus on
the retail side.”
Farr Miller Washington owns Home
Depot stock.
With the sale of the supply business
done, Davis said Home Depot would be free to take steps to improve retail sales
that have slumped amid the housing weakness and aggressive competition from
smaller rival Lowe's Cos Inc.
Davis said Home Depot, which is
boosting capital spending by 29 percent this year to improve stores and win
back market share, can improve shareholder returns by raising its dividend as
it matures.
"Over the long term, I don't
think (Home Depot’s) growth is going to be anywhere near where it was
historically,” Davis said.
Home Depot and the other firms
declined to comment.
Shares
of Home Depot shed 5 cents to $37.91 in morning trading on the New York Stock
Exchange.
June 19, 2007 - Home Depot In $10 Billion Deal To Sell HD Supply, Sources Say
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