The lack of credit available presently almost scuttled the Home Depot Supply Deal to Bain Capital, Carlyle Group and Clayton, Dubilier & Rice. The fear of losing the deal led to a prolonged negotiating session with the Home Depot Board of Directors finally accepting 18 percent less than was initially negotiated in June.
The real sticking point was that the Banks were looking for an out. They were planning on lending Bain ect. the money and then selling that debt on the open market. When the credit market collapsed and the banks were going to have to keep the debt on their books, they started to look for any way out of the deal. Instead, a nervouse Home Depot Board decided to take 1.8 billion less to keep the deal alive and force the bankers to lend Bain the money.
Home Depot’s board yesterday agreed to sell Home Depot Supply for $8.5 billion to Bain Capital, Carlyle Group and Clayton, Dubilier & Rice, about 18% less than the price hammered out in June when the buyout boom was at its peak.
In addition, Home Depot itself will hold about 12.5% of the unit’s equity, people familiar with the matter said, and guarantee some of the debt issued by the banks to finance the acquisition. That’s significant because if the banks can’t sell the debt in bond markets, and it sits on their balance sheet, they have to mark down its value, which some can ill-afford to do. via SmartMoney.com.
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