Home Depot''s supply unit goes to PE firms for $10 Billion

20 June 2007

Three private equity firms, Bain Capital, the Carlyle Group and Clayton Dubilier & Rice have entered in to an agreement with LeisureHome Depot to acquire its Home Depot Supply Unit for $10.3 billion.

The offer by the three PE firms beat a rival bid from Thomas H. Lee Partners and CCMP Capital Advisors.

Though the Home Depot Supply Unit, which provides pipes, lumber and concrete for professional builders, provided $12 billion in revenue, it had been a liability for the housing hardware supplier.

Started in 2000 by former CEO Robert L. Nardelli to overcome the space constraints to build new stores, the supply unit was also intended to serve as a wholesale supply business to expand the retailer''s reach and achieve cost savings through synergies, like buying in bulk for both its wholesale supply and retail divisions.

Nardelli, a former General Electric executive, was ousted earlier this year for being unable to raise the firm''s stagnant stock prices, and the supply unit was regarded as a liability left behind as a legacy as its profit margins could never match those of the retail business.

The housing slump in the US has also made it difficult to turn around the supply unit. Moreover, the company''s profits and sales in several of its 2,000 stores have fallen, even as those of its rival, Lowe''s, have risen.