Home Depot Cuts Price of Supply Unit; Shares Up

Home Depot
Rich Pedroncelli

Shares of Home Depotrose as much as 2 percent Monday after sources said the home improvement retailer agreed to cut the price in the sale of its supply unit by $1.8 billion to $8.5 billion.

Home Depot offered no confirmation or comment on the report, which also said that the retailer would retain a small stake in the unit and take on $1 billion of its debt.

In research notes, some analysts said the restructured deal remained a positive even with the less favorable terms, as it would still allow Home Depot to repurchase stock. But they added the terms of the company's current tender offer could be changed.

"We do expect Home Depot to complete its 250 million share tender, but we think there remains the possibility that the (price) range will be revised down a second time," Sanford Bernstein analyst Colin McGranahan wrote.

Earlier this month, amid jitters in the debt markets, the home improvement industry leader said it and the three private equity buyers of the supply unit -- Bain Capital Partners, Carlyle Group and Clayton, Dubilier & Rice -- were in talks that could lower the original $10.3 billion sale price.

The supply business provides materials to home builders and other commercial customers.

At that time, Home Depot also cut the price for the tender offer to a range of $37 to $42 a share, from $39 to $44 previously. The tender offer expires on Friday.

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

Home Depot shares, a component of the Dow Jones industrial average, were up 62 cents, or 1.8 percent, to $35.30. The shares have fallen 12 percent this year.