Capital Markets

Home Depot Halfway to $22.5b Buyback Goal

In buying 289.6m shares, mainly with $8b in proceeds from HD Supply sale, home-improvement retailer will use cash for the rest rather than tap credit.
Roy HarrisSeptember 4, 2007

About 290 million Home Depot Inc. shares were tendered in response to the company’s modified Dutch auction tender offer. The Atlanta-based home improvement retailer said it would repurchase 289.6 million shares at $37 a share, or a total of $10.7 billion, bringing to 48 percent of its previously stated goal of a $22.5-billion buyback.

Company spokeswoman Paula Drake told the Associated Press that Home Depot would use about $8 billion in net proceeds from its sale of HD Supply, and $2.7 billion in cash for the repurchases. She said that final results of the tender would be released next week. There is no specific timetable for continuing the company’s share repurchase, she added.

The use of cash in the tender offer means that the company did not utilize a $2 billion credit line it set up in connection with the tender offer, Drake told AP.

Based on preliminary results of the offer that expired Aug. 31, the company said that the shares being repurchased would consist of the 250 million shares that Home Depot initially had offered to purchase in this round of purchases, and about 39.6 million additional shares. The buyback will represent about 14.6 percent of all shares outstanding, the company said.

Home Depot announced on Aug. 30 that it had sold its HD Supply wholesale distribution business for $8.5 billion to a group of private equity firms — a price that had been reduced from the initially-agreed-on $10.3 billion in the wake of the global credit crunch.

The completed agreement calls for Atlanta-based Home Depot to retain a 12.5-percent stake in HD Supply, for which it would pay $325 million, and to guarantee $1 billion of debt the buyers took on to complete the transaction.

According to AP, shares of Home Depot fell $1.57, or 4.1 percent, to $36.74 in morning trading on Tuesday after the buyback announcement. Shares have traded between $31.85 and $42.01 during the past year.

4 Powerful Communication Strategies for Your Next Board Meeting