Deals and IPOs

Sale of Home Depot Supply Unit Hits Snags, Report Says


A private equity-led buyout of home-improvement retailer Home Depot's wholesale supply division, due to close on Thursday, could be in trouble because investment banks involved are reluctant to fund the transaction even at a lower price, a published report said.

Shares of Home Depot , a component of the Dow Jones Industrial Average, were down more than 2 percent Thursday. So far this year, the stock has fallen about 15 percent.

The Financial Times reported in its online edition that the sale of the Home Depot Supply unit, which provides materials to home builders and other commercial customers, could be at risk, citing people familiar with the negotiations.

But the report also said people familiar with the talks said parties hoped to reach a deal.

Home Depot spokeswoman Paula Drake had no comment.

"This added uncertainty is unwelcome and perhaps adds to the trading volatility of the shares," Raymond James analyst Budd Bugatch said in a research note.

Earlier this month, Atlanta-based Home Depot said it was in talks with private equity buyers about restructuring the deal that could result in a lower price than the original $10.3 billion.

Last week, the retailer said it and the private equity firms -- Bain Capital Partners, Carlyle Group and Clayton, Dubilier & Rice -- agreed to delay the proposed closing date of the accord to Aug. 23 from Aug. 16.

New terms, designed to make it easier for Merrill Lynch, Lehman Brothers and JPMorgan to finance the deal amid turmoil in credit markets, may not be enough however, according to the newspaper.

A spokesman for Clayton, Dubilier & Rice had no comment on the talks, and representatives of Bain Capital and Carlyle Group couldn't immediately be reached to comment.

The sale of the supply unit was intended to help fund a $22.5 billion share repurchase announced in June. As part of that plan, Home Depot currently has a tender offer outstanding to buy back 250 million shares.