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Negotiations continue on sale of Home Depot unit

August 24, 2007|From the Associated Press

Talks over restructuring a $10.3-billion deal to sell Home Depot Inc.'s wholesale distribution business went down to the wire Thursday, the expected closing date of the agreement.

The Atlanta-based retailer has hinted that the deal for its HD Supply unit could fall through or that the 2,200-store chain might have to lower the price. A spokeswoman declined to comment on whether the deal would be completed.

The company was close to accepting about $1.2 billion less in selling the unit to three private-equity firms, according to a Wall Street Journal report, quoting people familiar with the matter.

But substantial doubts still existed, the Journal said, about whether the deal would close before the deadline as three major banks balked over the financing.

Investors sent Home Depot shares down 75 cents to $34.02.

Talks continued late Thursday between Home Depot, the buyers and the buyers' financial backers over price and financing, and it was unclear when a decision would be reached, said a person with direct knowledge of the situation who asked not to be identified because he was not authorized to speak publicly.

The potential buyers are private equity firms Bain Capital Partners, Carlyle Group and Clayton, Dubilier & Rice.

The banks -- J.P. Morgan Chase & Co., Lehman Brothers Holdings Inc. and Merrill Lynch & Co. -- were preparing for the possibility of lawsuits from the private-equity firms over the matter, according to the Journal.

During a speech before the Rotary Club of Atlanta on Monday, Chief Executive Frank Blake said the deal to sell HD Supply was "hopefully" going to close "sometime very soon." He didn't address the issue further.

HD Supply serves contractors, home builders and other business customers.

Last week the world's largest chain of home-improvement stores said the expected closing date of the sale of HD Supply had been extended by a week, from Aug. 16 to Thursday.

Since the deal was announced in June, financial markets have faced turmoil, and Home Depot has said it was talking with buyers about restructuring the agreement.

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