User 42641

Home Depot's Supply Unit Sale Was a Fiasco

Todd,

Thanks for responding.

Your response to my comment refers to receipts and is entirely correct. However, in your original piece you wrote: "The Home Depot (HD) Supply unit sold for $8.5 billion, about $2 billion less than the originally agreed-upon $10.3 billion price tag,[...]"

This is misleading because the $8.5 billion represents only the first part of the transaction. When one accounts for the second part of the transaction (the $325 million paid by Home Depot for a 12.5% stake in HD Supply), this yields an implied valuation for the whole of HD Supply of $9.34 billion, as I explained.

Alex Dumortier

Home Depot's Supply Unit Sale Was a Fiasco

"The Home Depot (HD) Supply unit sold for $8.5 billion, about $2 billion less than the originally agreed-upon $10.3 billion price tag,"


This presentation of the facts is very misleading. If the private equity consortium pays $8.5 billion for HD Supply and Home Depot then purchases a 12.5% stake in HD Supply for $325 million, the effective valuation of HD Supply is (8.5 - .325) / (1 - .125) = $9.34 billion, or approximately $960 million less than the original $10.3 billion purchase price.

Bizarrely negative piece on Home Depot, in line with the tone of the author's prior contributions on the company.

Alex Dumortier, CFA

Full Disclosure: I have no beneficial interest in Home Depot shares, but I do cover the stock on behalf of The Motley Fool Inside Value, as it is one of our stock recommendations.

Home Depot: This Buyback Was Destined To Fail

<i>"This Buyback Was Destined to Faill"

"It looks like the Home Depot Supply unit sale that was scheduled to close today won't get done."</i>


The sale of HD Supply is set to close today. Bizarrely pessimistic piece on Home Depot, in line with the tone of the author's prior contributions on the company.

Alex Dumortier, CFA

Full Disclosure: I have no beneficial interest in Home Depot shares, but I do cover the stock on behalf of The Motley Fool <i>Inside Value</i>, as it is one of our stock recommendations.

Is Home Depot's Share Buyback At Risk? My Question Answered

<i>Like almost everything else they have done recently, the huge share repurchase announcement by Home Depot will end up making them look bad.</i>


Todd,

I've read the last couple of articles you've published on Home Depot and they express very negative views on the company -- beyond what the facts would warrant, in my opinion. In fact, unless you believe the share are fairly valued at current levels, I'm surprised that you would have such strong opinions on the company without caring to express them via a short position in the stock. I say this not to impugn your integrity -- I'm willing to believe that you don't have a position in the stock -- but to try to understand what is holding you back from taking one.

Alex Dumortier, CFA

Full disclosure: I have no beneficial interest in Home Depot, but I do follow the company on behalf of The Motley Fool <i>Inside Value</i>, a value investing newsletter that selected HD as a monthly pick.