Home Depot sells supply unit, will buy back $22.5B in stock on Home Services

Jan

Home Depot sells supply unit, will buy back $22.5B in stock

posted by admin in Home Depot

The Home Depot Inc. has sold its HD Supply segment for $10.3 billion to a group of private equity firms and will use the net proceeds and other funds to buy back company stock.

Atlanta-based Home Depot (NYSE: HD) said it will sell the unit to Clayton, Dubilier %26amp; Rice, Bain Capital and Carlyle Group. The deal is expected to close in the third fiscal quarter of 2007

HD Supply is the second-largest distributor of construction, industrial and maintenance supplies in North America and had more than $12 billion in revenue in 2006. The unit has nearly 1,000 locations in North America and employs 26,000 associates.

The sale comes about a year after Home Depot bought Orlando-based Hughes Supply for $3.2 billion and is seen as a repudiation of the strategy of Home Depot’s former Chairman and CEO Bob Nardelli to expand the division. Earlier this year, Atlanta-based Home Depot (NYSE: HD) began a review of strategic alternatives for HD Supply as part of a refocusing on its core retail business.

Today’s decision reflects our continued commitment to enhancing shareholder value, through an exclusive focus on our retail business and the return of cash to our shareholders, said Frank Blake, chairman and CEO. This year alone we will spend over $2 billion in support of our top five retail priorities. We are confident in the ability to improve productivity in our retail business through investment in these priorities, which will further enhance returns on invested capital as the investments take hold.

Home Depot also reported Tuesday its board of directors gave its approval to a $22.5 billion increase in the company’s share repurchase program. The company plans to buy back up to $22.5 billion in shares as soon as practicable. Home Depot will fund the stock buy back with the net proceeds from the sale of HD Supply, existing cash on hand and the net proceeds from an anticipated $12 billion issuance of senior unsecured notes.

Our planned recapitalization is transformational for our company, says Carol Tome, Home Depot chief financial officer. While we continue to invest heavily in the five priorities focused on our core retail business, this recapitalization plan allows us to return significant capital to our shareholders, improve the efficiency of our balance sheet by lowering our cost of capital, while at the same time retaining strong financial and operational flexibility.