The private equity consortium bidding for HD Supply, the wholesale distribution division of US DIY retailer Home Depot, has reached agreement with the vendor and with its financing partner
The private equity consortium bidding for HD Supply, the wholesale distribution division of US DIY retailer Home Depot, has reached agreement with the vendor and with its financing partners on an amended deal at a lower price, following the problems experienced with highly leveraged transactions in the wake of the US sub-prime mortgage crisis.
The revised deal between Home Depot and the consortium of Bain Capital Partners, the Carlyle Group and Clayton, Dubilier & Rice, involves a reduction in the purchase price of HD Supply from USD10.5bn to USD8.3bn, while Home Depot will take a 12.5 per cent equity stake in its former subsidiary for USD325m and guarantee a USD1bn senior secured loan.
Merrill Lynch, JP Morgan and Lehman Brothers have provided the consortium with revised debt commitment letters for 100 per cent of the third-party debt financing. Following the closing of the transaction due on August 30, Home Depot, which was advised by Goldman Sachs, expects to net some USD7.9bn in cash proceeds from the sale, taking account of the equity investment and expenses associated with the transaction.
‘The amended agreement reached by an acquisition corporation owned by funds affiliated with Bain Capital Partners, the Carlyle Group and Clayton, Dubilier & Rice and Home Depot reflects the diligent efforts to complete the HD Supply transaction on mutually acceptable terms,’ the consortium said in a statement. ‘We are pleased that the transaction will be completed on a basis that the Home Depot and the lending institutions can support.
‘As the buyer, we are particularly gratified to have reached this favourable outcome in the face of challenging conditions. We look forward to closing the transaction and working with the HD Supply management team on the company’s next phase of growth as an independent enterprise.’
Home Depot chairman and chief executive Frank Blake says: ‘Despite the softness in the financing and residential construction markets, the terms of the HD Supply sale deliver shareholder value today and in the future as we will share in HD Supply’s upside potential. We are now focused on our retail business.’
