Home Depot Sells Supply Unit for $10.3B, Boosts Share Buyback

Shares of Home Depot rose 5.2% to $40.27 in after-hours trading, on news it had sold its Supply unit for $10.3b to a private equity group. In addition, Home Depot's board authorized a $22.5b increase in its share repurchase program. The private equity group consists of Bain Capital Partners, The Carlyle Group and Clayton, Dubilier & Rice. The transaction is expected to close in Q3, subject to certain regulatory requirements and contingencies. The surprise share repurchase is a six-fold increase to Home Depot's previously announced $3.5b recapitalization, and represents more than a quarter of the company's market cap. Home Depot has repurchased 19% of its shares since 2002. It will commence "as soon as practicable," and be financed with proceeds from the sale, cash on hand and proceeds from an anticipated $12b issuance of senior unsecured notes. Moody's and S&P said its credit rating could be hurt by the debt financing. In a press release, Home Depot said it will update its 2007 guidance in July to reflect the impact of the sold unit. Lehman Brothers was Home Depot's exclusive advisor.

Sources: Press release, Bloomberg, Reuters, Wall Street Journal
Commentary: Home Depot to Get $10B Buyout Offers for Supply Unit -- Bloomberg • Dow Stocks Year to Date: Who Hasn't Participated In The Run? • Home Depot Is Poised For A Turnaround
Stocks/ETFs to watch: The Home Depot Inc. (HD), Lehman Brothers Holdings Inc. (LEH). Competitors: Lowe's Companies Inc. (LOW). ETFs: Retail HOLDRs (RTH), Consumer Discretionary SPDR (XLY), SPDR S&P Homebuilders (XHB)
Conference call transcripts: Home Depot F1Q07

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