Home Depot Sets Big Buyback

Home Depot (HD Quote) confirmed that it will sell its wholesale-distribution division to three private-equity firms, and the retailer said it will use cash from the sale to help fund a massive share buyback.

Shares were climbing $2.17, or 5.8%, to $40.44 in after hours trading.

The Atlanta-based home-improvement giant said Tuesday it will sell its HD Supply business to private-equity firms Bain Capital, Carlyle Group and Clayton, Dubilier & Rice for $10.3 billion. The company had been seeking to sell the supply division since earlier this year as it looks to repair its sagging retail business.

With the deal in place, Home Depot said it plans to repurchase $22.5 billion in shares as soon as possible, using money from the sale, cash on hand and proceeds from the issuance of $12 billion in notes.

The $22.5 billion share repurchase may be in the form of a tender offer, open market repurchases or accelerated share repurchases, the details of which will be announced at a later date, the company said.

Home Depot has about 1.97 billion shares outstanding. The stock closed Tuesday at $38.27, up 31 cents.

A $22.5 billion buyback at that price would represent about 587.9 million shares, or roughly 30% of Home Depot's outstanding stock.

"Our planned recapitalization is transformational for our company," said Chief Financial Officer Carol Tome. "While we continue to invest heavily in the five priorities focused on our core retail business, this recapitalization plan allows us to return significant capital to our shareholders, improve the efficiency of our balance sheet by lowering our cost of capital, while at the same time retaining strong financial and operational flexibility."