Home Depot sells HD Supply for $8.5 billion
After a marathon negotiating session with some of Wall Street’s top investment bankers, Home Depot agreed to mark down the price of its HD Supply unit by 18 percent, selling the three-year-old business unit for $8.5 billion.
As a further concession, the Atlanta retailer guaranteed $1 billion of the debt and will retain a 12.5 percent stake in the division, which is being taken over by three private equity groups, Bain Capital, Carlyle Group and Clayton, Dubilier & Rice.
By some accounts, Home Depot got caught between the shifting tectonics of a credit compression and a housing market slump. Although the company and the sellers originally settled on a price of $10.3 billion in June this year, investment bankers have become a lot more cautious about lending money over the past two months. Those financing the deal, Merrill Lynch, JPMorgan, Lehman Brothers and Goldman Sachs, were also spooked by declines in the home-building industry, according to observers.
Earlier this month, Home Depot announced that the deal might be restructured. It also extended the closing date of the sale from Aug. 16 to Aug. 23. Negotiations between the company, the private equity groups and the banks extended beyond this date, wrapping up on a Sunday when the Home Depot board voted to accept the lower price and other changes to the agreement.
Many on Wall Street heaved a sigh of relief when both sides shook hands; they had feared a collapsed deal would jeopardize mergers and acquisitions in other industries. For its part, Home Depot is anxious to move forward with a $22.5 billion share repurchasing plan, part of which will be financed with the $7.9 billion in net proceeds from the sale of HD Supply. The closing date for the stock tender offer was Aug. 31.
Lowe’s execs eye lawn care items, eco-friendly products
Speaking at the Goldman Sachs 14th Annual Global Retailing Conference, held today in New York, Patti Price, Lowe’s general merchandise manager for outdoor living, told investors and analysts what she expects will be trends to watch in the coming months.
“Because of drought [in some regions of the country], customers will be renovating their lawns,” Price predicted. Fall cleanup products and lawn care items are being promoted in Lowe’s stores, she said.
“We’ve had some real success in our holiday programs,” Price said. “We brought in John Deere. The merchants are so focused on moving the business ahead … we’re extremely well positioned for the back half of this year.”
Larry Stone, president and COO for Lowe’s, said new products that have been popular in Lowe’s stores include eco-friendly items and composite building materials.
“Something that’s really evolving, in my opinion, is all these composite products,” Stone said. “[There are] a lot of new products that customers want to use because they’re lower priced and lower maintenance.” Those products include composite siding, shutters and solid core composite flooring, he said.
Additionally, Stone said innovations in locksets, including keyless locks, have shown increased popularity in the home improvement market.
Stone spoke further on Lowe’s overall market position in the middle of a housing downturn, saying the company was “not happy with the negative 2.6 (percent) comps that we recorded” in the second quarter. He also said the company has seen weakness in big-ticket items, installed sales and special order sales.
However, Stone was optimistic about the next few years for the nation’s second largest home improvement retailer, adding, “Lowe’s will be well-positioned, once everything turns around, for further growth in the home improvement industry.”
Dave Heine joins BlueLinx
BlueLinx, one of the industry’s largest building materials distributors, has hired Dave Heine, the former vp-retail development at Do it Best. BlueLinx confirmed that Heine started this week as a senior national account executive, where he will call on Do it Best accounts and other independent dealers.
“I have worked with [Heine] for over 20 years as a customer and always admired his abilities, leadership style and integrity,” said BlueLinx president and chief operating officer George Judd.
Heine, a 28-year veteran of Do it Best, left in July after serving in a number of positions that included vp-lumber and building materials, vp-building products, vp-purchasing for pro and commercial products and manager of the lumber and commodities division.