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December 18, 2006

The Home Depot has received notice from investment firm Relational Investors LLC that it plans to submit a proposal at the next annual meeting to encourage HD to evaluate the "strategic direction of the company, the performance of management, and strategic alternatives for the company."

Relational is run by investor Ralph Whitworth, who has pushed for changes at other companies he has a stake in. Relational owns roughly 0.6% of HD outstanding common stock.

In a letter to CEO Bob Nardelli, Whitworth wrote that HD's board of directors is presented with "enormous responsibility and opportunity to reverse the company's inferior stock performance experienced since 2000. We attribute this performance to deficient strategy, operations, capital allocation and governance."

Relational said it would propose a special committee be formed to evaluate strategic alternatives, including a major operational restructuring and/or recapitalization, a partial or complete sale or buyout of the company, and/or a major recomposition of the executive team. (Read details in Relational's letter to HD.)

Home Depot said it would oppose any action the investment group plans to pursue but that it would arrange a meeting after the first of the year to discuss any concerns, consistent with HD's policy of "engaging in an open and direct dialogue with shareholders," HD said in the release.

HD also reported its board of directors unanimously supports the management team and its current strategy.

This report comes after rumors reported by the New York Post and CNBC that a group of investment firms was considering a buyout of the retail/wholesale giant for a record $100 billion.

Related Links:
Reports: Home Depot May Be Target of Private Equity Firms
Relational's letter to HD

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