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Home Depot sales rise as investors await word on possible sale of wholesale unit

ATLANTA - Shares of The Home Depot Inc. rose almost 2 percent Monday as investors awaited word of a deal that the retailer was selling its wholesale distribution business for nearly $2 billion less than originally planned.

The reduced sale price of $8.5 billion for the Home Depot Supply division, which was confirmed on Sunday by a person with direct knowledge of the situation, reflected turbulent credit conditions and a tightening housing market.

As Wall Street awaited a possible announcement, analysts welcomed the reports of a deal by the world's largest home improvement store chain.

'Look, they've been trying to sell Supply for a while,' said UBS analyst Brian Nagel. 'They're selling it for less than initially expected, but it's going to be a positive because it allows them to go ahead with the buyback plan and refocus on their core retail business.'

Deutsche Bank analyst Mike Baker echoed the sentiment in a research report, saying investors expected the price would be dragged down but were pleased the sale would go forward. And a Bank of America report on the agreement concluded: 'While less than originally planned, we believe a sale in this environment must be considered a positive.'

Home Depot declined Monday comment on the deal.

Its shares rose 57 cents, or 1.6 percent, to $35.25 Monday.

The retailer, which operates 2,200 stores in four countries and reported more than $90.8 billion in sales last year, wants to shed its supply business and refocus on retail sales. It also plans to buy back up to $22.5 billion in company shares.

The company had reached a deal in June to sell the supply unit for $10.33 billion to private equity investors Bain Capital Partners, Carlyle Group, and Clayton Dubilier & Rice.

But since then, as financial markets have faced turmoil, Home Depot had said it was talking with the buyers about restructuring the agreement, which it said could result in a lower price tag. The talks were supposed to wrap up Thursday, but continued for several more days.

After hours of negotiating over the weekend, the company reached a tentative sale, a person with direct knowledge of the situation told The Associated Press.

The person, who asked not to be identified because he was not authorized to speak publicly, said the revised agreement calls for Home Depot to receive $8.5 billion in cash instead of the original $10.3 billion.