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Wednesday, June 27, 2007

Home Depot is working to Dismantle the conglomerate created during the Nardelli Reign

Home Depot announced the sale of Home Depot Supply for $10.3 billion.  That portion of the company is now going private.  Wholesale companies in particular face a very difficult time in the publicly traded markets.  The demands of retailers, such as Home Depot make working in a public arena very difficult to compete or very difficult to compete within the generally accepted accounting principles.

Home Depot is essentially undoing former CEO Bob Nardelli's achievements.  He put together Home Depot Supply combining several wholesale and distribution companies to support Home Depot in a more vertical direction.  Stockholders and employees however felt that a more effective horizontal platform was in order and Nardelli left the company last winter under a firestorm of criticism aimed at Nardelli and the board resulting from his hefty exit salary.

Home Depot intends to repurchase about 25% of their outstanding shares for approximately $22.5 billion.  Much of the remaining cash will be borrowed to buy back the stock.  This increased debt will likely decrease Home Depot's debt rating. 

Link to Sale of Home Depot supply unit effaces former CEO’s strategy - Business -