Home Depot Shares Up on Hopes of Supply Unit Sale

Home Depot

Shares of Home Depot were up 1.3 percent Friday as investors waited for word about whether a sale was on or off for the home improvement retailer's contractor business.

The Wall Street Journal reported that the retailer was close to accepting about $1.2 billion less than the original $10.3 billion price for the unit's sale to three private equity firms. But the paper, citing unnamed sources, added that major banks were balking over the financing.

The sale was due to close Thursday.

A Home Depot spokesman had no comment Friday. "Nine billion dollars is not bad actually if it goes through," said Zahid Siddique, an analyst with Gabelli. But he added, "the stock will drop if the deal fails."

Standard & Poor's retail analyst Michael Souers reiterated a "strong buy" recommendation on the stock, saying in a research note that he believes the sale "will ultimately close."

Earlier this month, amid jitters in the debt markets, the home improvement industry leader said it and the three private equity buyers -- Bain Capital Partners, Carlyle Group and Clayton, Dubilier & Rice -- were in talks that could lower the price of the unit, which provides materials to home builders and other commercial customers, Home Depot also cut the price at the time for a current tender offer for 250 million shares to a range of $37 to $42 a share, from $39 to $44 previously, citing market conditions.

The supply sale was intended to help fund a $22.5 billion stock repurchase announced in June. But company Chief Financial Officer Carol Tome suggested on Aug. 14 that should there be no supply sale, the size of the buyback could be reduced to $12 billion.

Home Depot shares were up 44 cents, or 1.29 percent, to $34.46, in late morning trade. So far this year, the shares are down about 14 percent.