The Home Depot Announces Agreement to Sell HD Supply to Private Equity Authorization



    ATLANTA, June 19 /CNW/ -- The Home Depot(R), the world's largest home
improvement retailer, today announced that its board of directors has approved
strategic measures to enhance shareholder value.  These measures include
entering into an agreement to sell HD Supply and the execution of a
recapitalization plan.
    (Logo:  http://www.newscom.com/cgi-bin/prnh/20030502/HOMEDEPOTLOGO )

    
    Sale of HD Supply
    
    In February 2007, The Home Depot began a strategic review of HD Supply,
the Company's wholesale distribution division, in an effort to increase the
Company's focus on its core retail business.  After a thorough review of
alternatives, the board unanimously approved the sale of HD Supply to private
equity firms Bain Capital Partners, The Carlyle Group and Clayton, Dubilier &
Rice for $10.3 billion.  Subject to certain regulatory requirements and
contingencies, the sale of HD Supply is expected to close in the third fiscal
quarter of 2007.  The transaction is not conditioned upon financing.
    "HD Supply is a leader in its industry.  We are proud of the business we
built and know that it will continue to grow and flourish under new
ownership," said Frank Blake, chairman and CEO.  "I'd like to thank Joe
DeAngelo and the entire HD Supply leadership team for their contributions to
The Home Depot."
    "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.  This year alone we will spend over $2
billion in support of our top five retail priorities.  We are confident in the
ability to improve productivity in our retail business through investment in
these priorities, which will further enhance returns on invested capital as
the investments take hold," said Blake, chairman and CEO.
    "Through the hard work and dedication of HD Supply's 26,000 associates,
we have built a business that sets the standard in the industry," said Joe
DeAngelo, COO and executive vice president.  "We've got a bright future ahead
and we're confident we'll continue to prosper."

    
    Recapitalization Plan
    
    The board of directors also authorized a $22.5 billion increase in its
share repurchase program.  It is the Company's intent to repurchase up to
$22.5 billion in shares as soon as practicable.  The Company will fund the
$22.5 billion share repurchase with the net proceeds from the sale of HD
Supply, existing cash on hand and the net proceeds from an anticipated $12
billion issuance of senior unsecured notes.  The $22.5 billion share
repurchase may be in the form of a tender offer, open market repurchases or
accelerated share repurchases, the details of which will be announced at a
later date.
    "Our planned recapitalization is transformational for our company.  While
we continue to invest heavily in the five priorities focused on our core
retail business, this recapitalization plan allows us to return significant
capital to our shareholders, improve the efficiency of our balance sheet by
lowering our cost of capital, while at the same time retaining strong
financial and operational flexibility," said Carol Tome, CFO and executive
vice president - Corporate Services.

    
    Capital Allocation Philosophy
    
    Combined with today's announcements, the Company reiterated its capital
allocation principles:
    
    --  Dividend Principle:  Deliver a predictable increase each year,
        targeting payout at approximately 30%
    --  Share Repurchase Principle: After meeting the needs of the business,
        use excess liquidity to repurchase shares, with value creation as the
        priority
    --  Return on Invested Capital Principle: Maintain a high return on
        invested capital, benchmarking all uses of excess liquidity against
        value created for shareholders through share repurchases

    Targeted Capital Structure
    
    The Company announced that its targeted capital structure will be to
maintain an average total adjusted debt/EBITDAR ratio of 2.5x.  Total adjusted
debt includes debt on the balance sheet plus 8x operating rents and EBITDAR is
defined as earnings before interest, taxes, depreciation, amortization and
rent expense.
    "By targeting debt levels relative to the underlying cash flow generation
of the business (EBITDAR), our ongoing financing plans will support our retail
business.  We are confident in our ability to sustain strong cash flow
generation and the financial flexibility necessary to continue executing our
business strategy as well as returning cash to shareholders through dividends
and repurchases," said Tome.
    Lehman Brothers served as the Company's exclusive financial advisor for
the strategic review of HD Supply and the recapitalization plan.  Wachtell,
Lipton, Rosen & Katz served as the Company's legal advisor.

    
    2007 Guidance
    
    At the end of the first quarter of 2007, the Company said that it
expected consolidated sales including HD Supply to increase by 1-2% in fiscal
2007 and earnings per share, on a 52 week basis, to decline by 9%.  To reflect
the impact of the HD Supply discontinued operation, the Company plans to
update its fiscal 2007 sales and earnings per share growth guidance in July
2007.
    The Company will hold a conference call on Wednesday, June 20, at 11:30
a.m. ET to discuss this announcement. The conference call will be available in
its entirety through a webcast and replay at homedepot.com in the Investor
Relations section.

    The Home Depot(R) is the world's largest home improvement specialty
retailer, with 2,184 retail stores in all 50 states, the District of Columbia,
Puerto Rico, U.S. Virgin Islands, 10 Canadian provinces, Mexico and China.  In
fiscal 2006, The Home Depot had sales of $90.8 billion and earnings of $5.8
billion. The Company employs approximately 364,000 associates. The Home
Depot's stock is traded on the New York Stock Exchange (NYSE:   HD) and is
included in the Dow Jones industrial average and Standard & Poor's 500 index.
HDG

    This release includes certain supplemental financial information not
derived in accordance with generally accepted accounting principles ("GAAP").
These non-GAAP measures include total adjusted debt and EBITDAR. This
supplemental information should not be considered in isolation or as a
substitute for the GAAP measures of debt. The Company believes that the
presentation of these non-GAAP measures provides meaningful information that
is useful to investors as it indicates more clearly the Company's targeted
capital structure and expected operating performance. Management targets the
Company's debt levels to a ratio of adjusted debt to EBITDAR in order to
structure debt levels relative to the underlying cash flow generation
(EBITDAR) of the business.
    Certain statements contained herein, including any statements related to
the sale of HD Supply, the planned recapitalization of the Company,
continuation of reinvestment plans, capital allocation principles, targeted
capital structure, sales growth and earnings per share guidance for fiscal
2007, constitute "forward-looking statements" as defined in the Private
Securities Litigation Reform Act of 1995.  These statements are based on
currently available information and are based on our current expectations and
projections about future events.  These risks and uncertainties include, but
are not limited to: the successful divestiture of HD Supply, including timing
of the close of such transaction; economic conditions in North America;
conditions affecting customer transactions and average ticket, including, but
not limited to, weather conditions; improving and streamlining operations and
customers' in-store experience; and the impact of competition. Undue reliance
should not be placed on such forward-looking statements as they speak only as
of the date hereof, and we undertake no obligation to update these statements
to reflect subsequent events or circumstances except as may be required by
law. Additional information regarding these and other risks and uncertainties
is contained in our periodic filings with the SEC, including our Annual Report
on Form 10-K for the fiscal year ended January 28, 2007.





For further information:

For further information: Financial Community: Diane Dayhoff, Sr. Vice 
President of Investor Relations, +1-770-384-2666, 
diane_dayhoff@homedepot.com, or News Media: Paula Drake, Public Relations 
Manager, +1-770-384-3439, paula_drake@homedepot.com, both of The Home Depot
Web Site: http://www.homedepot.com/


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