Home Depot Reduces Sale Price for Supply Unit
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Monday, August 27, 2007
ATLANTA, Aug. 26 -- Home Depot has tentatively agreed to sell its wholesale distribution business to a group of private-equity firms for $1.8 billion less than originally planned, and it will retain a small stake in the unit, a person with direct knowledge of the situation said Sunday.
The deal, which also includes Home Depot guaranteeing $1 billion of the debt the buyers will take on to complete the transaction, was hammered out during several days of talks that continued into the weekend, the person said.
The person, who spoke on the condition of anonymity because he was not authorized to speak publicly, said the revised agreement calls for Home Depot to receive $8.5 billion in cash instead of the original $10.3 billion agreed to in June.
Home Depot will retain a 12.5 percent stake in the HD Supply unit, the person said.
Even though Home Depot is accepting less than anticipated for the unit, the deal is expected to let it proceed with its plan to buy back up to $22.5 billion in company shares.
A Home Depot spokeswoman declined to comment.
The world's largest home-improvement store chain had hinted previously that the deal could fall through or that the price would have to be reduced.
Atlanta-based Home Depot had said publicly that the deal was not contingent on financing but that there were scenarios under which a party could walk away.
When the deal was first announced, Home Depot said it would sell the unit for $10.3 billion to a consortium of private-equity firms headed by District-based Carlyle Group. But since then, as financial markets have faced turmoil, Home Depot had said it was talking with the buyers about restructuring the agreement, which it said could result in a lower price tag. The talks were supposed to wrap up Thursday but continued for several more days.
According to a regulatory filing, the agreement could have been terminated prior to the completion of the sale by mutual consent.
The original agreement contained customary termination rights based on breaches of representations or covenants subject to the materiality standards of the agreement and rights of the parties to cure such breaches.
Home Depot operates 2,200 stores in the United States, Canada, Mexico and China. HD Supply serves contractors, home builders and other business customers.
