CoStar has been tracking for readers the happenings since Home Depot's June 19th agreement to sell its HD Supply to a private equity group comprised equally of Bain Capital Partners, Carlyle Group, and Clayton Dubilier & Rice for $10.325 billion.
The home improvement giant announced the deal's completion late Thursday for $8.5 billion.
Despite the original receipt of two $10 billion bids for its HD Supply unit, the deal was restructured with an 18% slash in the sale price to $8.5 billion. With many blaming tightening credit and the housing downturn, the final stage of the restructuring ended with Home Depot, the buyout firms and the participating banks (Lehman Brothers, JPMorgan Chase and Merrill Lynch) putting up more money to finance the deal. Specifically, each buyout firm increased its equity commitment to $150 million each, adding up to $800 million; while Home Depot agreed to take 12.5% equity in HD Supply and guarantee a $1 billion senior secured loan.
Bain Capital Partners, Carlyle Group, and Clayton Dubilier & Rice are equal partners in the transaction. Home Depot expects to net $7.9 billion in cash proceeds from the sale.
Home Depot reported HD Supply had produced revenues in excess of $12 billion in 2006; through nearly 1,000 locations, HD Supply is the second largest distributor of construction, industrial and maintenance supplies in North America. Home Depot's sale of the unit has been the subject of controversy, as many thought it could help the retailer weather the housing downturn; Home Depot has been experiencing consistent decreases in sales recently.
Upon announcing the buyout, Home Depot said it would repurchase $22.5 billion in shares, funded from the net proceeds of HD Supply's sale. Some thought that repurchase would be reduced as a result of the sale price reduction, but Home Depot says it remains committed to that amount. The repurchase is part of management's plan to focus on retail operations, "recapitalize and transform" Home Depot. Its goal is to deliver consistent dividends to shareholders, lower cost of capital, improve financials and operational flexibility.
Clayton, Dubilier & Rice has a history with HD Supply. The New York-based private equity firm was one of the bidders that lost out to Home Depot in buying Hughes Supply a few years ago. The firm's portfolio of investments includes Hertz Corp., Rexel Group, Lexmark, Kinko's, Culligan, and Uniroyal.
With its U.S. offices based in Washington, D.C., The Carlyle Group is a private equity firm with $58.5 billion under management. Retail brands in its portfolio include Dr. Pepper, Seven Up, Dunkin' Brands, Mattress Giant, Britax, and Hertz.
Boston's Bain Capital Partners is a private equity firm with $50 billion in assets under management. Its retail brands include Dunkin' Brands, Burger King, KB Toys, Duane Reade, Domino's, Mattress Discounters, Samsonite, Sealy, Sports Authority, and many others.
This article is excerpted from "COSTAR's RETAIL NEWS ROUNDUP: September 2 to September 7, 2007," a weekly feature covering the gamut of retail acquisitions and mergers, joint ventures, retailer expansion plans, new store openings, new concepts, store closings, new retail developments, sustainable retailing, significant personnel changes, and more written by CoStar News Senior Editor Sasha M. Pardy. click here to read the full column.