Home Depot Falls Most In Four Years, Likely To Cut Sales Price of Supply Unit

What seemed like a sure-thing $10.325 billion sale of Home Depot's contractor-supply unit to private equity groups Bain Capital LLC, Carlyle Group and Clayton Dubilier & Rice two months ago is now unlikely to go down as planned. Home Depot released a statement Thursday saying discussions were taking place with the aforementioned private equity groups with the "purpose of restructuring the previously announced agreement for the sale of HD Supply. These discussions could result, among other things, in material changes to the terms and financing of the transaction, including a reduction in the $10.325 billion purchase price." The announcement sent shares down 5.32% in composite trading Thursday, on heavy volume of 37.1 million shares -- the biggest single-day fall in more than four years. With a liquidity squeeze making it difficult for private equity groups to fund leveraged buyouts, it is unclear as of yet how much Home Depot will have to reduce the price of its supply unit to make a sale more palatable to the buyers. The unit accounts for 13% of Home Depot's revenue. The company reported total revenue of $81.5 billion in 2006.

Sources: Bloomberg, AP, Reuters, MarketWatch, Dow Jones Newswires
Commentary: Home Depot Sells Supply Unit for $10.3B, Boosts Share Buyback • Is Home Depot's Share Buyback At Risk? • Home Depot Lowers 2007 Earnings Guidance
Stocks/ETFs to watch: HD. Competitors: LOW. ETFs: RTH, XLY
Earnings call transcripts: Home Depot Q1 2007

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