Home Depot Inc. has agreed to sell its supply division to three private-equity firms in a roughly $10 billion deal, sources told Reuters News Agency today.

Home Depot Inc. has agreed to sell its supply division to three private-equity firms in a roughly $10 billion deal, Reuters News Agency reported today.

Bain Capital, Carlyle Group and Clayton, Dubilier & Rice won the auction and were finalizing the deal earlier today, sources close to the process told Reuters.

HD Supply, which sells building materials, waste water and utility products to municipalities and contractors, was put up for sale earlier this year, with investment bank Lehman Brothers overseeing the auction.

Several groups of private-equity firms showed initial interest in the unit, but backed away late in the process as the slowdown in the U.S. housing market hurt the business, sources involved with the auction previously told Reuters.

The winning bidders topped a rival offer from a team consisting of Thomas H. Lee Partners and CCMP Capital, according to The New York Times.

The sale price of about $10 billion was somewhat lower than investors and analysts had expected, Keith Davis, an analyst with Farr Miller Washington, told Reuters.

“Home Depot may be taking a bit of a price concession,” Davis said. “They are kind of selling at a bad time. They believe that shareholders would rather see them get it done.”

By selling HD Supply and focusing on the retail stores, Home Depot is repudiating former CEO Robert Nardelli's efforts to expand the unit.

The company launched the supply business in 1997 and expanded it by acquiring companies like water and sewer products supplier National Waterworks Holdings in 2005 and paying $3.2 billion for Hughes Supply in 2006.

Clayton, Dubilier & Rice had been among the final bidders for Hughes Supply, but it lost to Home Depot, sources previously told Reuters. Buying HD Supply would allow the private-equity firm to reclaim Hughes, as well as other distribution assets.

“When the market was really strong, Home Depot viewed the supply business as a way to diversify,” Farr Miller's Davis said. “Now people think it makes sense to get back to basics and focus on the retail side.”

Farr Miller Washington owns Home Depot stock.

With the sale of the supply business done, Davis said Home Depot would be free to take steps to improve retail sales that have slumped amid the housing weakness and aggressive competition from smaller rival Lowe's Cos Inc.

Davis said Home Depot, which is boosting capital spending by 29 percent this year to improve stores and win back market share, can improve shareholder returns by raising its dividend as it matures.

"Over the long term, I don't think (Home Depot’s) growth is going to be anywhere near where it was historically,” Davis said.

Home Depot and the other firms declined to comment.

Shares of Home Depot shed 5 cents to $37.91 in morning trading on the New York Stock Exchange.