Home Depot Details Buyback
Associated Press
September 5, 2007; Page A13
ATLANTA — Home Depot Inc. said it expects to repurchase 290 million of its shares for $10.7 billion as a
result of a tender offer, a little less than halfway toward its goal of buying back $22.5 billion in stock.
Preliminary results of the tender offer that ended Friday indicated the chain of home-improvement stores
expects to repurchase the shares at $37 each, using about $8 billion in net proceeds from its sale of HD
Supply and $2.7 billion in cash, said spokeswoman Paula Drake.
The 290 million shares represent about 48% of the company’s plan to repurchase $22.5 billion in shares.
Ms. Drake said the company will continue buying back shares but she said there was no specific timeline
for doing so.
The company’s shares fell $1.95, or 5.1%, to $36.36 as of 4 p.m. in New York Stock Exchange composite
trading yesterday.
Home Depot said last month that it had sold HD Supply — its wholesale distribution business — for $8.5
billion sale to a group of private-equity firms. The sale price was reduced from the $10.3 billion the buyers
initially agreed to pay in June.
The completed agreement calls for Home Depot to retain a 12.5% stake in HD Supply and to guarantee $1
billion of debt the buyers took on to complete the transaction.
Copyright � 2007 Associated Press
THINK ABOUT THESE:
1.) Define the terms “treasury stock” and “stock repurchases.” In general, what is the impact of stock
repurchases on a company’s balance sheet equation?
2.) What is a tender offer? What was the result reported by Home Depot from its tender offer that ended
Friday, August 31?
3.) What is the source of financing for Home Depot’s share repurchase through its tender offer?
4.) Provide summary journal articles for the transactions described in this article: 1) The sale of HD
Supply; 2) the repurchase of shares submitted via the tender offer that ended August 31, 2007; and 3) the
remainder of the planned repurchase with funding as described in the second related article.
5.) What will be the combined impact of the 3 transactions described in answer to question 4 above on
Home Depot’s balance sheet assets, liabilities, and stockholders’ equity?
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