August 28, 2007 in Business

Investors await news on sale of Home Depot supply division

The Spokesman-Review
 

Shares of The Home Depot Inc. rose almost 2 percent Monday as investors awaited word of a deal that the retailer was selling its wholesale distribution business for nearly $2 billion less than originally planned.

The reduced sale price of $8.5 billion for the Home Depot Supply division, which was confirmed Sunday by a person with direct knowledge of the situation, reflected turbulent credit conditions and a tightening housing market.

As Wall Street awaited a possible announcement, analysts welcomed the reports of a deal by the world’s largest home improvement store chain.

Home Depot declined Monday comment on the deal. Its shares rose 57 cents, or 1.6 percent, to $35.25 Monday.

The retailer, which operates 2,200 stores in four countries and reported more than $90.8 billion in sales last year, wants to shed its supply business and refocus on retail sales. It also plans to buy back up to $22.5 billion in company shares.

The company had reached a deal in June to sell the supply unit for $10.33 billion to private equity investors Bain Capital Partners, Carlyle Group, and Clayton Dubilier & Rice. But since then, as financial markets have faced turmoil, Home Depot had said it was talking with the buyers about restructuring the agreement, which it said could result in a lower price tag.

After hours of negotiating over the weekend, the company reached a tentative sale, a person with direct knowledge of the situation told The Associated Press.

•A federal judge Monday barred investors from seizing the assets of two Bear Stearns Cos. hedge funds for 10 days but indicated he is considering lifting the funds’ U.S. bankruptcy protections.

Judge Burton Lifland, of the U.S. Bankruptcy Court in Manhattan, said he hadn’t reached a decision on the funds’ request for U.S. Chapter 15 protection, which would allow the funds to seek bankruptcy-law protection in the United States while liquidating in the Cayman Islands.

The two funds bet heavily on subprime mortgage loans and as defaults increased, creditors began to clamor for their collateral, leaving the funds short on cash.

Provisional liquidators working to unwind the funds in the Caymans estimate that the High-Grade Structured Credit Strategies Master Fund could see recoveries of $25 million, and the smaller High-Grade Structured Credit Strategies Enhanced Leverage Master Fund could see recoveries of less than $50 million.

Shares of Bear Stearns fell $3.38, or 2.9 percent, to $113.72 in afternoon trading Monday.


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