Home Depot Writes Down HD Supply Investment - Modern Distribution Management

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Home Depot Writes Down HD Supply Investment

Report: HD Supply surprised by HD move to value investment at zero.
HD Supply CEO Joe DeAngelo is not happy about Home Depot’s move to write down its investment in the distribution company it founded to zero, The Atlanta Journal Constitution reported. (Read the full article from AJC.)
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According to the paper, DeAngelo reported that other investors have also written down their investments to 20 to 40 cents on the dollar. He told the AJC: "I’m the largest personal investor on the leadership team. The company is worth less than when I invested it. I got that. But I’m certainly confident I’ll get it back. It’s my coin on the table."
Home Depot made the announcement about its write-off in its earnings release. (The news story from MDM on Home Depot’s earnings can be found here.)
Home Depot sold its HD Supply wholesale distribution unit to a trio of private equity firms – Bain Capital, Clayton Dubilier & Rice, and Carlyle Group – in August 2007. The unit was sold for $8.5 billion; Home Depot was to retain a 12.5% equity interest in the company for $325 million, and it guaranteed a $1 billion senior secured loan.
When the private equity groups bought HD Supply, the acquisition included a portfolio of 11 businesses and HD Supply Canada, and total annual revenues of $12 billion. Annual revenue has fallen hard since then, due of course to rough economic conditions. HD Supply reported sales in the third quarter ended Nov. 1, 2009, were down by nearly 25%. For the first nine months of the year, sales were $5.83 billion with a loss of $346 million.
Here is an interview I conducted with DeAngelo in the first year after the deal – HD Supply: After the Deal



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