HD Supply sale price cut to $8.5bn

Home Depot has agreed to accept $1.8 billion less than previously agreed in the sale of its HD Supply unit to Carlyle, Bain and Clayton, Dubilier & Rice.

Bain Capital Partners, The Carlyle Group and Clayton Dubilier & Rice will pay $8.5 billion (€6.2 billion) instead of $10.3 billion for Home Depot’s wholesale supply unit, HD supply, as the health of the US credit and housing markets continue to cause concern for investors.

Earlier this month, Home Depot said it was restructuring the deal, which would possibly result in a lower sale price.

The deal’s underwriters – JP Morgan, Lehman Brothers and Merrill Lynch – have also revised their debt commitments for the deal, though the banks did not reveal the new terms of the debt.

Home Depot has also agreed to hold 12.5 percent of HD Supply’s equity for $325 million, and guarantee $1 billion of the deal’s senior debt.

“Despite the softness in the financing and residential construction markets, the terms of the HD Supply sale deliver shareholder value today and in the future as we will share in HD Supply’s upside potential,” Home Depot chairman and chief executive Frank Blake said in a statement.

The three private equity firms agreed to buy HD Supply in June, around four months after Home Depot said it would consider strategic alternatives for the struggling unit.

A group led by TPG may also lower the €3.4 billion offer it was considering for Spanish airline Iberia, according to The Sunday Telegraph. The report quoted a source saying the price could come down in mid-September due to the rising cost of debt financing and the possibility of falling air fares if the economy turns. TPG, which is still performing due diligence and has not yet made an offer, declined to comment on the “rumour”.