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Home Depot considers sale of business service division

A sale of Home Depot Supply may be felt in Orlando, which wants to become its headquarters.

By STAFF, WIRE REPORTS
Published February 13, 2007

ATLANTA - Home Depot Inc., the world's largest home improvement store chain, distanced itself further from the strategies advanced by former chief executive Bob Nardelli as it said Monday that it will consider shedding its division serving contractors, home builders and other business customers.

Its shares rose on the news.

Some analysts said the decision to possibly sell Home Depot Supply could benefit the company by allowing it to focus on generating value for shareholders, while others suggested it could put the onus back on the company's retail side, where it faces tough competition from Lowe's.

The decision has implications for Florida, where Home Depot doubled the size of its contractor wholesale business last year with the acquisition of Hughes Supply Inc. of Orlando.

While the supply unit remains based at the parent company's headquarters in Atlanta, civic leaders in Orlando had been assembling an incentive package to woo the supply operations to the old Hughes Supply headquarters there, where about 3,000 people work. Nardelli had set Home Depot Supply on a course to double its size through acquisitions again to as much $27-billion within five years, but that plan now is clearly on hold.

Monday's announcement followed a decision earlier this month to give a seat on its board to an investment group that wants Home Depot to consider a leveraged buyout of the entire company as a way to generate shareholder value.

The group, Relational Investors LLC, had threatened a proxy fight over the company's strategic direction, part of an undercurrent that led to Nardelli's resignation in early January.

Frank Blake, who replaced Nardelli, said Monday's announcement on Home Depot Supply was part of a strategic review conducted in November.

Times staff writer Mark Albright and the Associated Press contributed to this report.

[Last modified February 13, 2007, 06:13:41]