Home Depot To Consider Sale Or IPO Of HD Supply

The Home Depot, Atlanta, said it has hired a financial advisor to explore strategic alternatives, including a possible sale, of its wholesale distribution business, HD Supply

The company has retained Lehman Brothers as its financial advisor to assist in this process. Other alternatives include a spinoff or initial public offering of the business.

Frank Blake, the new chairman and CEO of The Home Depot, said the company wants to increase its focus on its retail business. "We are undertaking this action today because of our desire to increase our focus on our retail business. With annual revenues of approximately $12 billion, HD Supply is a healthy, growing and vibrant business, and we are undertaking this evaluation to determine whether there are strategic alternatives with respect to HD Supply that would optimize shareholder value."

Home Depot Supply’s 2006 acquisitions of Hughes Supply, Orlando, Fla., and Edson Electric Supply, Phoenix, rocked the electrical wholesaling industry. With nearly 1,000 locations nationwide and in Canada and 26,000 associates, HD Supply serves business-to-business customers such as homebuilders, municipalities and contractors in the construction, commercial, industrial, MRO, utility and public works markets.

In an interview with Electrical Wholesaling magazine in January, HD Supply said it had big plans to grow its HD Supply business. HD Supply was gunning for annual sales of $12 billion this year and told Wall Street it wanted to grow to $25 billion by 2010. But that was before the resignation of former CEO Bob Nardelli, who saw an opportunity to pursue the professional wholesale business because the consumer home improvement market was becoming saturated. Nardelli resigned in early January after six years at the helm of Home Depot.

Earlier this month, the company said it is giving a seat on its board to an activist investor who has been critical of Home Depot’s strategy to pursue the wholesale distribution market. The group, Relational Investors LLC, had threatened a proxy fight over Home Depot’s strategic direction.

Blake said the company wants to increase its focus on its retail business. "We are undertaking this action today because of our desire to increase our focus on our retail business. With annual revenues of approximately $12 billion, HD Supply is a healthy, growing and vibrant business, and we are undertaking this evaluation to determine whether there are strategic alternatives with respect to HD Supply that would optimize shareholder value."