Atlanta, GA, December 4, 2006--Home Depot Chairman and Chief Executive Bob Nardelli squelched rumors that his management team is looking at a $100 billion deal to take the company private, according to the Atlanta Journal-Constitution.
The newspaper quoted Home Depot Chief Executive Bob Nardelli said media reports are 'an unfortunate distraction.'
"It's just not true," Nardelli told business leaders at a Cobb County Chamber of Commerce gathering. Nardelli's rebuff was prompted by an audience question about a news report that said Home Depot might be interested in what would be a record-setting leveraged buyout by a group that includes behemoth Kohlberg Kravis Roberts & Co, according the the newspaper.
Several industry analysts said Friday that such a deal — nearly three times the size of the biggest leveraged buyout ever — was unlikely and would be difficult to pull off. And investors seemed to yawn, only pushing up the company's stock by $1, albeit in heavy trading on the New York Stock Exchange.
For weeks, Home Depot, along with other large public companies, has been listed among possible wild-card targets in a massive buying spree launched by the world's largest private-equity firms.
The Wall Street rumor mill is always active with chatter, but the speculation spiked Thursday when the New York Post, citing unidentified sources, reported that KKR and Texas Pacific Group had talked to investment banks about financing such a deal. No formal offer for Home Depot has been made, the account said.
A CNBC commentator on Wednesday also said that KKR had "crunched the numbers" for such a deal, which even by Wall Street standards would be enormous.
Nardelli told the business group on Friday not to read too much into it — it's par for the course on merger-happy Wall Street.
"On any given day, we are running numbers on lots of other companies," Nardelli said, referring to the dozens of acquisitions Home Depot has made in recent years. "Somebody is probably running the numbers on us, too."
He also blamed the media for "creating news" on a slow news day and called it "an unfortunate distraction."
Nardelli said, "We remain laser-focused on running the company as we are."
Later Friday, Home Depot stated in a filing with the Securities and Exchange Commission that "the company has had no discussion about a potential leveraged buyout or recapitalization." KKR declined comment.
Still, that did not stop some analysts from considering the odds of such a deal and what a Home Depot buyout might look like.
With interest rates still close to historic lows, investors have gotten financing for some blockbuster deals this year. Just last week, private-equity firm Blackstone Group agreed to buy Equity Office Properties Trust, the country's largest office building owner, for about $36 billion — the largest leveraged buyout in history.
Private equity firms, which typically buy a company using mostly borrowed money, have announced about 1,000 takeovers in the United States this year, worth about $356 billion, according to Thomson Financial. That's up from $138 billion in private-equity deals announced last year.
Leveraged buyouts used to target distressed firms, but a new generation of investors — including pension funds, trusts and endowments — has widened its reach.
The stock market has surged along with the deal-making this year. Shareholders of the buyout targets are doing especially well — buyout firms are paying an average of 17 percent over the market share price in deals this year, according to Thomson Financial.
Home Depot's stock has been a sore spot for shareholders. The shares have barely moved in the six years since Nardelli took over as CEO.
Also contributing to the stock's slump has been a slowdown in the U.S. housing market. Nardelli recently warned investors the slowdown will stretch into 2007.
