Business Insight Zone

Another sour reminder of the erstwhile Bob Nardelli regime for Home Depot: thanks to the still-unfolding credit crunch, the private-equity shops buying the HD Supply unit have negotiated a lower price — $8.5 billion instead of $10.3 billion.

Home Depot Cuts Supply Unit Price to $8.5 Billion

… Buyers Bain Capital LLC, Carlyle Group and Clayton Dubilier & Rice negotiated a reduction after the firms’ lenders demanded better terms, said the people, who declined to be identified because the accord hadn’t been signed. Home Depot agreed to sell the unit, HD Supply, for $10.3 billion in June.

Home Depot will finance $1 billion of the purchase, the people said. Home Depot also will take about a 13 percent stake in the unit, one person said.

The sale was threatened by a slump in demand for private- equity debt and the worst U.S. housing market in 16 years. Banks, which usually finance transactions and then offload the debt into the capital markets, are pushing for lower purchase prices as they grow increasingly concerned that they’ll be left with billions of dollars of loans.

HD Supply was Nardelli’s baby when he ran Home Depot. It was an effort to move Home Depot squarely into the wholesale supplier business, providing commercial-grade fixtures and materials to contractors and the like. It didn’t work as planned, and after Nardelli left, the company decided to hive it off so that they could focus on their traditional retail operations. And now they’re having to sell it at a discount. Better than not selling it at all, I guess, but still — it’s got to hurt.