Home Depot, the world’s largest home-improvement retailer and North America’s fifth-largest equipment rental company last week agreed to sell its contractor supplies unit HD Supply to three buyout firms for $10.3 billion.
The Atlanta-based company also said it may purchase a record $22.5 billion of its stock. The buyback amounts to 30 percent of the company’s outstanding shares.
The sale to Bain Capital LLC, Carlyle Group and Clayton Dubilier & Rice could close before the end of October, which closes its third fiscal quarter, the company said. Carlyle and Clayton Dubilier also own parts of Hertz Corp., including Hertz Equipment Rental Corp.
CEO Frank Blake took over the company in January after the departure of Robert Nardelli, who had plans to expand HD Supply.
“Today’s decision reflects our continued commitment to enhancing shareholder value, through an exclusive focus on our retail business and the return of cash to our shareholders,” said Blake. “This year alone we will spend over $2 billion in support of our top five retail priorities. 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.
HD Supply chief operating officer and executive vice president Joe Angelo will continue with the supply division.
The share repurchase is six times a $3.5 billion buyback Home Depot announced in August. The company said it will finance the share repurchase with the net proceeds from the sale of HD Supply, as well as existing cash and $12 billion in the issuance of senior unsecured notes.
“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,” said Carol Tome, chief financial officer and executive vice president — corporate services.
Home Depot Rentals is No. 5 on the RER 100 with more than $600 million in 2006 rental revenue. It has more than 1,200 rental locations.