And the private equity buyouts continue

Discussion in 'Wall St. News' started by S2007S, Jun 19, 2007.

  1. S2007S

    S2007S

    Seems nothing can stop these buyouts. Its called cheap debt. Who knows how long this can continue. Remember the subprime market fallout, this will be even worse if it starts to fall apart.




    Home Depot Sells Wholesale Unit for $10 Billion, People Say

    By Mark Clothier and Jason Kelly

    June 19 (Bloomberg) -- Home Depot Inc., the world's largest home-improvement retailer, agreed to sell its HD Supply wholesale unit for more than $10 billion to a group of private- equity investors, people with knowledge of the agreement said.

    Bain Capital LLC, Carlyle Group and Clayton Dubilier & Rice will buy the division, and the transaction will be announced later today, said the people, who declined to be identified because the discussions are private.

    The unit sells lumber and other materials to construction companies as well as furniture and janitorial supplies to hotels. It accounted for about 13 percent of Atlanta-based Home Depot's $91 billion in sales last year.

    Some investors had criticized the company for expanding HD Supply, a business that's less profitable than its retail stores. Since taking over in January, Home Depot's Chief Executive Officer Frank Blake has promised to focus on those stores.

    Analysts including Colin McGranahan of Sanford C. Bernstein & Co. expected the unit to sell for as much as $13 billion when Home Depot announced in February it was considering a sale. The decision to look for alternatives for HD Supply was part of a review conducted in November, Home Depot said.

    Home Depot spokesman Tony Wilbert and Clayton Dubilier & Rice spokesman Tom Franco declined to comment. Representatives for Bain and Carlyle didn't return calls seeking comments.

    Shares of Home Depot fell 8 cents to $37.88 at 10:12 a.m. in New York Stock Exchange composite trading.

    Making Acquisitions

    Home Depot paid as much as $8 billion to acquire 38 companies over the past several years for HD Supply, David Schick, an analyst with Stifel Nicolaus & Co., wrote in a research note Feb. 12.

    Robert Nardelli, Blake's predecessor, expanded the wholesale unit through the acquisitions. Some investors said the expansion of the division, where sales rose 46 percent to $3.1 billion in the quarter that ended April 29, distracted Home Depot from focusing on its retail stores.

    Blake has adopted policies to allay shareholder criticism of the company's oversight under Nardelli, who was ousted in January over his pay. The company increased the number of directors needed to approve executive compensation and agreed to disclose some political donations for the first time.

    Lowe's Cos., which operates about 1,400 stores in the U.S., has outperformed Home Depot in recent years with newer stores and customer service that gets higher ratings. Home Depot has 2,170 stores, about 1,895 of them in the U.S.

    Home Depot shares fell less than a percent last year, compared with a 6.5 percent drop for Lowe's.