Home Depot mulls ‘strategic alternatives’

The world’s largest home improvement retailer is evaluating a sale, spin-off, or initial public offering of its $12bn revenue wholesale distribution business, HD Supply.

The Home Depot announced Monday it will consider “strategic alternatives” with regard to its HD Supply division, and has retained Lehman Brothers as its financial advisor.

The Atlanta, Georgia-based company is evaluating a possible sale, spin-off, or IPO of the wholesale supply division, as it wishes to increase its focus on its retail business, according to a statement released Monday by Home Depot’s new chairman and chief executive officer, Frank Blake.

HD Supply – which employs more than 26,000 associates at nearly 1,000 locations in the US and Canada – has annual revenues of approximately $12 billion. The division racked up $3.5 billion in third quarter sales – a 159 percent increase compared to the third quarter 2005.

The chain’s retail stores had a softer third quarter sales performance than expected, its former CEO said in an earnings release, as sales at stores open more than a year fell by 5.1 percent during the period.

In November, then-CEO Bob Nardelli attributed the same-store sales decline to the slowing US housing market, and assured shareholders the home improvement giant was “making the right decisions” to strengthen its retail business and continue to develop its HD Supply division “to ensure that we emerge even stronger when the housing cycle rebounds”.

Nardelli was replaced by Blake in January; it’s subsequently been reported that several large US buyout firms have expressed interest in acquiring HD Supply.

Reuters reported that in addition to private equity firms, Sanford Bernstein analyst Colin McGranahan has noted a possible buyer might be international heating, plumbing and building material supplier Wolseley PLC, which is based in the UK.

According to the statement issued Monday by Home Depot, it does not intend to disclose further information or developments regarding HD Supply until a transaction has been approved by its board of directors. It added that it will neither guarantee that any transaction will take place, nor issue any assurances as to a possible transaction’s terms or timing.

Home Depot has 2,159 retail stores in the US, Mexico, Canada, and China.