Home Depot, buyers hash out new HD Supply deal

After a marathon negotiating session that lasted through the weekend, Home Depot has confirmed that it will sell HD Supply for $8.5 billion, $1.8 billion less than the original terms with three private equity firms. The company expects to net approximately $7.9 billion in cash proceeds from the sale.

"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. We are now focused on our retail business," said Frank Blake, chairman and CEO of Home Depot.

Home Depot will guarantee $1 billion of the debt and retain a 12.5 percent stake in the division. The company is expected to still move forward with its $22.5 billion share repurchasing plan.

This past June, Home Depot announced its intention to sell its HD Supply to Bain Capital, Carlyle Group and Clayton, Dubilier & Rice for $10.3 billion. But in the span of two short months, a credit crisis developed on Wall Street, making investment banks more cautious and putting the squeeze on corporate buyouts. Merrill Lynch, JPMorgan, Lehman Brothers and Goldman Sachs were all involved in the HD Supply talks, according to various sources.

Earlier this month, Home Depot announced that it was talking to the potential HD Supply buyers about restructuring the terms. It also extended the closing date of the sale from Aug. 16 to Aug. 23. According to a SEC document, both sides could have called off the deal by mutual consent.

On Aug. 30, Home Depot confirmed the sale had been finalized.