Looks like Home Depot (NYSE: HD) has finalized the sale of its wholesale distribution business as of late yesterday. Sheldon Liber wrote a good piece on this deal earlier in the week, and the deal was expected to close by the end of this week -- which it did. The $8.5 billion sale was made to a group of private equity interests, and was down from the initial $10.3 billion price from the group just in June of this year. What a billion-dollar difference a few months makes, eh?

The Home Depot will retain a 12.5% stake in HD Supply (for which it'll pay $325 million), along with guaranteeing about a billion in net debt as part of the agreement mandated by the equity group that sealed the deal. With the new-found cash, The Home Depot plans to use quite a bit of the sale sum to repurchase its own shares in the open market on the way to a total stock buyback amount of $22.5 billion. After the deal was made public yesterday, the home improvement chain re-stated its intention to purchase up to 250 million of its own shares in the range of $37 to $42 per share. Why does the company so feverishly want to buy back so many of its own shares? How about its reduction of the HD Supply deal by $1.8 billion? Well, it's retaining 12.5% ownership now, so that reduction is not as large as it seems.

According to reports, the deal came in at about $1.8 billion below the June agreement due to market volatility, and recent teeter-totter activity in the market almost caused a restructuring of the original agreement. Regardless of the real reason, the deal was done and completed yesterday for the $8.5 billion amount. The deal was actually completed last Sunday, but was only made public late this week after every detail was finalized and probably triple-checked. With HD shares hovering at under $39 -- they've been under $44 for three years now -- it's of little surprise what this massive buyback is intended for. What's your guess? Will the 12.5% stake start growing like a fertilized weed soon? It better, since HD shares are sitting on the sidelines with little movement. Well, for now at least.

The Home Depot (NYSE: HD) has been a big disappointment to me this year and to long-term shareholders it has been worse.

The brutal housing market, slowing construction, tapped-out consumers, tightening credit markets, not to mention rampant company mismanagement, have all played their part. Then you have the competition from Lowe's (NYSE: LOW), so maybe I was just early and there is a lot of opportunity ahead. I tend to think so, but this story is about the sale of Home Depot's Supply Unit:

The original deal was for private equity firms Bain Capital Partners, Carlyle Group and Clayton, Dubilier & Rice to purchase price HD Supply for $10.3 billion, now reduced to $8.5 billion. This is $1.8 billion less, but that is not the end of the story. Home Depot will be receiving 17.476% less money but is selling 12.5% less of the company so the real difference is a 4.976% reduction in the price. This is not such a bad deal since it now shares in the upside of the new entity's future. Some might argue a path to an upside that will be paved by a better management group.

Although I am sure I am in the minority on this issue, I think The Home Depot negotiated a good deal given the circumstances. It is better for all concerned. The banks have less exposure, the private equity buyers have less risk and a lower purchase price and HD gets to close the deal with some future upside. This may actually work out better than the original deal.

Does anyone believe that the new owners will not outpace HD's return on equity or invested capital? I would bet that remaining 12.5% interest in HD Supply doubles in value faster than Home Depot's stock value. Interestingly, while the words I read here and there make this deal out as a disappointment the action on Wall Street has the stock trading up as a I write, about $1.2 billion in capitalization. Given that the option of not closing the deal might have caused the stock to trade lower, the difference between the downside risk and the upside stock move probably equals or exceeds the $1.8 billion dollars. So I like the deal very much.

To verify my track record, including bad calls, read Chasing Value and Serious Money.

Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm.

It looks like Home Depot's sale of its wholesale division will go through. But, to add insult to injury, Home Depot (NYSE: HD) had to drop the price of Home Depot Supply from $10.3 billion to about $8.5 billion to keep private equity buyers in the deal. Then it had to guarantee $1 billion of the debt being taken on to buy the operation because large banks recoiled at the idea of loaning money to a company linked to the housing business.

Bain Capital, Carlyle Group, and Clayton, Dubilier & Rice had made the original offer. But, as the mortgage industry began to implode and home sales dropped, large banks wanted to walk away from the deal. All of the parties had a reason to keep the buy-out alive. As The Wall Street Journal writes: "Both sides had agreed that if the financing for HD Supply fell apart, it would spook debt markets further, potentially casting more doubt on a series of higher-profile transactions."

The big cut in price raises the question of whether or not Home Depot shareholders are getting a good deal. At $10.3 billion, the purchase price was at least in line with the value that the market gives Home Depot. The world's largest home supply company planned to use the money to buy back shares and perhaps pay down some of its $11 billion in debt.

But, at some point, the price is simply too poor for Home Depot shareholders to take. And, that is what may have happened.

Douglas A. McIntyre is a partner at 24/7 Wall St.

It's been a lonely place at BloggingBuyouts lately. There's been a few deals – but no mega deals. And, of course, there's lots of buzz about troubled deals, such as Home Depot's (NYSE: HD) attempted sale of its wholesale business.

Unfortunately, according to a recent piece in Reuters, it looks like the loneliness will continue for the rest of the year -- if not through a good part of 2008.

Basically, there is about $330 billion in debt to get placed – which is not easy when the financial system is in the midst of a credit crunch. In fact, on conference calls from firms like Blackstone (NYSE: BX) and Fortress (NYSE: FIG), the message is that dealmaking is in the freezer.

If anything, private equity firms are probably going to do smaller deals – or buy up discounted debt or other securities.

Of course, this is very bad news for the investment banks, which have been addicted to fees generated from LBO deals.

Although, I think these firms will try focus on other things, such as IPOs (which have lucrative fees) and also try to drum up M&A deals among strategic parties. But, there are limits here too.

In other words, I think Wall Street is going to be down-and-out for awhile.

Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.

For the past few years, things have been nearly perfect for the private equity world. Credit was cheap and public companies were certainly willing to go private.

But, of course, things are much different now. In fact, there is some doubt that mega deals -- such as for TXU Corp. (NYSE: TXU) and SLM Corp. (NYSE: SLM) -- may not get done because of the tough credit environment.

However, can buyers legally walk from a deal?

Home Depot (NYSE: HD) hoped it had sold its HD Supply business to private equity interests for $10.325 billion. Problems in the credit market trashed the deal.

HD announced that it is now in "discussions with affiliates of Bain Capital Partners, The Carlyle Group and Clayton, Dubilier & Rice for the purpose of restructuring the previously announced agreement for the sale of HD Supply."

That means that the buyers want a better price because they cannot raise the cake to make the purchase. Obviously, no sane bank or investment firm wants to make a high-risk loan for a high-leverage deal. Not with most of them holding the bags on other deals that they could not syndicate to institutional investors.

Market conditions are also causing the retailer to drop the price at which it will buy its shares in its previously announced "Dutch auction" tender offer to purchase up to 250 million shares of its common stock at a price between $39 and $44. Market conditions have caused the company to drop the price range to between $37 and $42 per share.

If the market needed a sign that the credit markets are on the critical list, this is it. One of America's largest companies lowering the price of a buyback and three premiere private equity firms unable to raise capital for a previously announced deal. Imagine how bad things are getting for less marquee deals.

Home Depot shares are down almost 6% in the pre-market.

Douglas A. McIntyre is a partner at 24/7 Wall St.

Given all the controversy that Robert Nardelli's tenure at Home Depot (NYSE: HD) generated, and the much-maligned $210 million severance package he collected, there's a lot of confusion about why he was chosen to head the Cerberus Capital's newly-private Chrysler.

As Jonathan Berr wrote earlier, "he has no experience in the auto industry. Moreover, he was a horrible CEO at Home Depot whose arrogance was matched by a lack of operational skills. The Atlanta-based retailer is in the process of selling off its HD Supply Division, which Nardelli built, to private equity group lead by Bain Capital for $10.3 billion. Home Depot also lost market share to Lowes Cos. (NYSE: LOW) and saw its stock price fall about 8% under Nardelli's leadership."

The consensus seems to be that Nardelli was chosen because of his expertise in turnarounds. But will the arrogance that led to a major falling out with shareholders and a disastrous annual meeting also create problems in crucial negotiations with the United Auto Workers?

Maybe that challenge is what's motivating Nardelli. He's already richer than anyone could ever need to be. But the conventional wisdom on him is that he's a strong operational guy, but lacks strong people skills. Nardelli's a pretty determined guy, and if he can turn the determination that led to trouble with shareholders into something positive, he just might be the guy for Chrysler.

Kevin Schult reported the following on BloggingStocks:

According to sources, Bain Capital, Carlyle Group and Clayton, Dubilier & Rice have won the $10 billion auction for Home Depot's (NYSE: HD) Supply Unit and were finalizing the deal today, Reuters reports.

Several private equity groups had shown interest in HD Supply, which sells business materials, waste water and utility products to municipalities and contractors, but because of the ongoing slump in the U.S. housing market, those firms backed away.

The $10 billion price tag was somewhat lower than some investors and analysts expected, according to Farr Miller's Keith Davis, which owns Home Depot shares. The winning group outbid an offer from Thomas H. Lee Partners and CCMP Capital.

By selling off HD Supply, Home Depot will now be able to better focus on the retail division and its arch competitor, Lowe's (NYSE: LOW). That's something ex-CEO Bob Nardelli failed to realize about the low-margin Supply division throughout his six-year tenure.

With Home Depot's retail unit slumping and the need to get back to basics, I certainly hope management doesn't make any aesthetic changes, similar to Wal-Mart's (NYSE: WMT) change to polo's and khakis. Could you imagine a Home Depot employee in khakis, without his trusty orange apron?

Kevin Shult is a writer for TheFlyOnTheWall.com (subscription required).

Bloomberg News featured an interesting piece entitled Wall Street bankers wonder how big leveraged buyouts can get. With the value of leveraged buyouts in the first quarter of 2007 up a staggering 40% year over year, private equity mania doesn't appear to be slowing down yet, although The Carlyle Group may be going conservative.

But in addition the reality of a large increase in the overall size of the industry, there are also questions about how big individual deals can get. Earlier this year, we began to hear rumors that Home Depot (NYSE:HD)could become a buyout candidate, a deal that just a few years ago would have been considered to large to even consider. Consider this line from the Bloomberg piece:

"What was deemed to be possible a year ago, when we thought the limits were $25 billion to $30 billion, has been easily beaten, particularly in the U.S.," said Gavin MacDonald, the London-based head of European mergers and acquisitions at Morgan Stanley. A $100 billion deal "isn't outside the realms of possibility," he said.

There may be a compelling reason for firms like Carlyle, Blackstone, and KKR to look at 100 billion dollar deals. With the private equity industry exploding, there is a lot of competition for smaller deals, and that competition is making attractive buyout candidates harder to find. But with only a handful of players with war chests big enough to even dream about acquiring a Home Depot or an Anheuser Busch, (NYSE:BUD) they may be able to find better deals there. Flying in an airplane may seem dangerous because it's fast and unfamiliar, it's actually safer than driving because there's no traffic. That may apply to leveraged buyouts as well.