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According to sources, Bain Capital, Carlyle Group and Clayton, Dubilier & Rice have won the $10 billion auction for Home Depot's (NYSE: HD) Supply Unit and were finalizing the deal today, Reuters reports.Several private equity groups had shown interest in HD Supply, which sells business materials, waste water and utility products to municipalities and contractors, but because of the ongoing slump in the U.S. housing market, those firms backed away.
The $10 billion price tag was somewhat lower than some investors and analysts expected, according to Farr Miller's Keith Davis, which owns Home Depot shares. The winning group outbid an offer from Thomas H. Lee Partners and CCMP Capital.
By selling off HD Supply, Home Depot will now be able to better focus on the retail division and its arch competitor, Lowe's (NYSE: LOW). That's something ex-CEO Bob Nardelli failed to realize about the low-margin Supply division throughout his six-year tenure.
With Home Depot's retail unit slumping and the need to get back to basics, I certainly hope management doesn't make any aesthetic changes, similar to Wal-Mart's (NYSE: WMT) change to polo's and khakis. Could you imagine a Home Depot employee in khakis, without his trusty orange apron?
Kevin Shult is a writer for TheFlyOnTheWall.com (subscription required).
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Reader Comments (Page 1 of 1)
6-19-2007 @ 4:49PM
Troy Smith said...
Another reason Home Depot may have decided to sell this unit was the growing reluctance of many contractors to use them as a source because they see HD as an emerging competitor. The only way to counter that is to sell cheap and that is not very profitable. In the end, it was easier to sell a low margin business and keep peace with the 15% of customers that represent 75% of sales. I worked for a General Contractor in the Phoenix, AZ market and that was my experience.