ATLANTA - The Home Depot Inc. is selling its wholesale distribution business to a group of private equity firms for $10.3 billion, over the objection of some shareholders.

On June 19, the board approved the sale of Home Depot Supply to Bain Capital Partners, The Carlyle Group, and Clayton, Dubilier & Rice. The sale is expected to close later this year.

The board also authorized a $22.5 billion increase in the company’s share repurchase program. “Today’s decision reflects our continued commitment to enhancing shareholder value, through an exclusive focus on our retail business and the return of cash to our shareholders,” said Frank Blake, CEO, in a June 19 statement.

Home Depot spent the past few years building up its wholesale unit, which serves contractors, homebuilders, and other business customers. It bought $5 billion diversified distributor Hughes Supply in early 2006, and National Waterworks, at the time with $1.5 billion in annual sales, for $1.35 billion in mid-2005.

The division has more than 26,000 employees, with revenues of $12.1 billion in 2006. The bulk of its operations are in Orlando, Fla.

Little more than a month after former CEO Robert Nardelli retired, Home Depot announced in February it would consider a potential Home Depot Supply spin-off. Nardelli had pushed the wholesale division as a way to diversify Home Depot’s offering and spark growth to balance out a slowing retail division.

When Blake became chief executive this year, he decided to review the division and consider a sale or other alternatives.

“We, as a company, are solely focused on retail,” said Carol Tome, CFO, adding that proceeds from the sale will be invested back in the retail business, including investing in existing stores and building new ones.

The company said it will fund the $22.5 billion share repurchase with the proceeds from the sale of Home Depot Supply, existing cash on hand, and by issuing $12 billion in senior unsecured notes.

Publication date: 07/02/2007