Home Depot to buyback stock

By Michael Flaherty and Karen Jacobs

NEW YORK (Reuters) - Home improvement retailer Home Depot Inc. (HD.N: Quote, Profile, Research, Stock Buzz) on Tuesday said it would repurchase $22.5 billion in stock and sell its supply division to three private equity firms for $10.3 billion as it refocuses on its core retail business.

The sale of HD Supply to Bain Capital Partners, Carlyle Group CYL.UL and Clayton, Dubilier & Rice unloads a business built up by the home improvement retailer's former chief executive.

Shares of Home Depot rose 3.5 percent to $39.60 in after-hours trading on news the company would repurchase $22.5 billion in stock, or nearly one-third its total market capitalization of $74.9 billion, "as soon as practical."

The stock buyback will be funded from proceeds from the sale of HD Supply, existing cash, and new debt, the company said.

Home Depot's buyback, if completed, would rank as the fifth-largest share repurchase by a U.S. company, according to research firm Dealogic. Microsoft Corp. (MSFT.O: Quote, Profile, Research, Stock Buzz) established a $30 billion stock repurchase plan in 2004, Dealogic said.

Shares of Home Depot have fallen about 3.6 percent this year as growth in its core retail business slowed amid the weakening U.S. housing market and increased competition with smaller retail rival Lowe's Cos. Inc. (LOW.N: Quote, Profile, Research, Stock Buzz)

"We believe Home Depot's future financial policy will continue to be more shareholder-friendly given goals of using excess liquidity to repurchase shares and create value for shareholders," said Standard & Poor's credit analyst Stella Kapur.

"While we view Home Depot as having a strong business profile ... we also do not foresee a quick turnaround in the housing market," Kapur said.