August 9th, 2007, filed by Jessica Hall
Home Depot Inc.’s auction of HD Supply seemed troubled from the start. Now the deal may be renegotiated as the private equity buyers balk at the $10.3 billion price tag amid the floundering housing market and tight credit conditions.
“This clearly is not a near term positive to (Home Depot) nor to a market nervous over credit,” said Credit Suisse analyst Gary Balter. “The deal was not contingent on financing, though the material adverse change (MAC) clause may be broad enough to push for renegotiation.”
Balter said it was likely that HD Supply, which sells building materials, waste water and utility products to municipalities and contractors, would be sold for “materially less” than the current agreement.
“We would not be surprised if (Home Depot) ends up with a piece of the equity similar to Daimler’s retained interest in Chrysler—maybe up to 20 percent as that would create a better equity floor for the debt financing. Over time, this would not be the worst thing for HD as we believe there is value in HD Supply.”
Shares of Home Depot shed $1.71, or 4.5 percent, in midday trading after it said it may reprice the HD Supply deal and cut the price of a planned share buyback.
“This is clearly a negative near-term for (Home Depot) … and may have broader implications for other pending capital markets transactions.”
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on Thursday, August 9th, 2007 at 5:20 pm and is filed under Reuters Deal Zone, Reuters DealZone, Reuters Shop Talk, Text.
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