By Lisa Kerner
Charlotte, N.C., June 19 - The Home Depot Inc.'s board of directors approved strategic measures that include the sale of the company's HD Supply business to Bain Capital Partners, the Carlyle Group and Clayton, Dubilier & Rice for $10.3 billion.
The sale is expected to close in the third quarter and is not conditioned on financing.
"HD Supply enjoys premium positions in an attractive, $400+ billion market where we have deep experience and prior investment success," said Clayton, Dubilier & Rice partner David A. Novak said of the acquisition.
By selling off HD Supply, Home Depot said it can focus on its retail business and returning cash to its shareholders.
"This year alone we will spend over $2 billion in support of our top five retail priorities," chairman and chief executive officer Frank Blake stated in a company news release.
"We are confident in the ability to improve productivity in our retail business through investment in these priorities, which will further enhance returns on invested capital as the investments take hold."
Home Depot's board also authorized a $22.5 billion increase in its share repurchase program. The company plans to repurchase shares "as soon as practicable" in a tender offer, open market repurchases or accelerated share repurchases, according to the release.
The repurchase will be funded using the net proceeds from the sale of HD Supply, existing cash on hand and the net proceeds from an anticipated $12 billion issuance of senior unsecured notes.
"While we continue to invest heavily in the five priorities focused on our core retail business, this recapitalization plan allows us to return significant capital to our shareholders, improve the efficiency of our balance sheet by lowering our cost of capital, while at the same time retaining strong financial and operational flexibility," executive vice president Carol Tome added.
Home Depot outlined its capital allocation principles that include delivering a predictable increase each year, using excess liquidity to repurchase shares and maintaining a high return on invested capital.
"We are confident in our ability to sustain strong cash flow generation and the financial flexibility necessary to continue executing our business strategy as well as returning cash to shareholders through dividends and repurchases," Tome said.
Home Depot is an Atlanta-based home improvement retailer. HD Supply distributes wholesale construction, industrial and maintenance supplies.
| Acquirers: | Bain Capital Partners, the Carlyle Group and Clayton, Dubilier & Rice
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| Target: | The Home Depot Inc.'s HD Supply
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| Transaction total: | $10.3 billion
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| Announcement date: | June 19
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| Expected closing: | Third quarter
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| Stock price for target: | NYSE: HD: $37.96 on June 18
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