Home Depot to cut unit sale price by $1.8 billion: sources

By Michael Flaherty

NEW YORK (Reuters) - Home Depot Inc (HD.N: Quote, Profile, Research, Stock Buzz) agreed to cut the price in its supply division sale to buyout firms by $1.8 billion, sources said on Sunday, as a housing market drop and a credit crunch forced all sides to renegotiate.

As part of the new agreement, Bain Capital, Carlyle Group CYC.UL and Clayton, Dubilier & Rice will pay $8.5 billion for the division, two sources familiar with the matter told Reuters.

The move marks the first time a major private equity deal has been forced to lower its price since the leveraged buyout boom began roughly two years ago.

The deal is also a turning point for the private equity industry, as the banks and the buyers have endured a long and ugly renegotiation that is likely to have wide repercussions.

The buyout firms will kick in an extra $150 million each in equity into the deal and Home Depot will take on $1 billion of the unit's debt, one source said.

The Atlanta-based home improvement retailer will also take a roughly 10 percent equity stake in the division, another source said. The sources did not want to be identified ahead of an official announcement expected early on Monday.

Home Depot and the buyout firms declined to comment.

The reduced price comes as the credit market crunch has forced banks to reel in loose lending practices that came to define the private equity deal frenzy of the last two years.