Home improvement retailer Home Depot said Thursday a deal to sell its supply unit was being renegotiated and may result in a lower price than the previously announced $10.3 billion.
The company also said it was lowering the price range for a tender offer to repurchase its stock to $37 to $42 a share, from the previous $39 to $44.
The dual announcement helped drive Home Depot shares down more than 6 percent in morning trading, compared with a 1.2 percent decline in the Dow Jones industrial average.
The unit sale renegotiation is the latest sign that difficulties in raising debt to fund takeovers is starting to crimp deal prices and prompt buyers to seek to amend previously agreed deals.
Home Depot said its stock buyback was not contingent on the unit sale. But it said in June that it planned to partly finance the share buyback with proceeds from the sale.
Giri Cherukuri, head trader at Oakbrook Investments, which owns 600,000 shares of Home Depot, said the renegotiation may signal that private equity firms are not be willing to pay $10.3 billion for Home Depot Supply, which distributes a wide range of building materials to contractor markets.
"There may be difficulty raising the money; and second, they (private equity firms) could see that the housing market might be worse than expected," Cherukuri said.
He said private equity firms may have been planning to issue debt to fund the purchase of the supply unit, a prospect that now may be complicated by turmoil in the credit markets.
In June, Home Depot announced that affiliates of Bain Capital Partners, the Carlyle Group and Clayton, Dubilier & Rice would buy the supply unit. The retailer had been considering options for the unit since February.
In recent weeks, Home Depot shares have dipped below the price range it originally set for its planned repurchase of 250 million shares. The tender offer now expires on Aug. 31, it said.
"Since the share price has dipped, it enables Home Depot to offer a lower price because it still will be a premium to the current price," Cherukuri said.
The Atlanta-based retailer said more than 3 million shares had been tendered to it as of Aug. 8. It said shareholders who have tendered shares at prices of $42.25 to $44 would need to submit new tenders if they still wanted to sell their shares.
Home Depot shares were down $2.54 to $35.26 in morning trade on the New York Stock Exchange. So far this year the shares are down 10 percent.