Home Depot Mum on China Chain

Home Depot Inc. (HD) on Monday declined to comment on a report that it is in talks to buy a stake in a Chinese retailing chain, but at least one analyst said the move would be consistent with the top home improvement retailer's goals.

The Financial Times reported that Atlanta-based Home Depot is in talks to buy up to 49 percent of Chinese retail chain Orient Home, whose parent firm is Orient Group Inc., for more than $200 million.

A Home Depot spokesman said the company does not comment on rumor or speculation. In June 2005, press reports in China also said Home Depot was interested in buying a stake in Orient Home, which had at least 27 stores across China.

Home Depot is looking to expand internationally and last year received approval from China's government to invest in stores there. The retailer has stores in the United States, Canada and Mexico.

In a research note, Goldman Sachs analyst Matthew Fassler said the reported interest in the Chinese retailer was "consistent" with Home Depot's goals and Wall Street expectations.

"We believe that an alliance ... or minority investment with option for increased ownership would enable Home Depot to participate in China's economic development without the difficulties associated with navigating its political and cultural challenges alone," Fassler said.

Home Depot last month bid $3.2 billion for construction materials supplier Hughes Supply Inc. (NYSE:HUG - news), accelerating its move into businesses that serve cities, builders and industrial customers as it looks for growth outside its current retail channels.

Its shares were up 47 cents, or about 1.2 percent, to $39.69 in early afternoon trading on the New York Stock Exchange, while shares of rival Lowe's Cos. Inc. (NYSE:LOW - news) were up 78 cents, or 1.25 percent, to $63.40.