Sycamore Partners to Buy Staples Inc. for $6.9 Billion

After months of speculation, we finally can report that private equity firm Sycamore Partners will acquire Staples Inc. in a transaction valued at approximately $6.9 billion, which is significantly higher than the original estimation of $6 billion.

Staples’ board of directors unanimously approved the merger agreement before the 4th of July holiday.

“Today’s announcement is the result of a comprehensive process in which our board, with the assistance of a transaction committee comprised of independent directors and outside financial advisors, explored and considered various alternatives to enhance value for our stockholders,” Robert Sulentic, chairman of the board, said in a press release. “Staples’ board believes that this process has led to a transaction which is in the best interests of our stockholders, as well as Staples and its employees.”

The deal is subject to customary closing conditions, including stockholder approval, and should be finalized no later than December 2017.

“With an iconic brand, a winning strategy and dedicated and passionate associates who are deeply focused on the customer, Staples is truly an outstanding enterprise,” said Stefan Kaluzny, managing director of Sycamore Partners, which already owns retailers like Talbots, the Limited and Hot Topic. “We have tremendous confidence in CEO Shira Goodman and great respect for the Staples management team, and are excited about this opportunity to partner with them to accelerate long-term profitability.”

It hasn’t been the best of times for the once-dominant retail chain. The company is reeling from the effects of heightened competition, thanks to the likes of Amazon, and a failed merger attempt with Office Depot. But The New York Times pointed to several bright spots:

• Staples still sells huge volumes of paper, printer cartridges and electronics.
• Staples sells a minority of its goods at brick-and-mortar locations. “Some $10.6 billion of its sales are delivered, compared with about $6.6 billion sold in stores,” the news outlet reported. “That suggests that even as stores close and consumers shop online, Staples has a large and potentially profitable opportunity.”
• Staples only has about $1 billion in debt.

The New York Times, however, also speculated that if Sycamore Partners is unable to restore faith in the company among investors, the firm might try to sell Staples to a different private equity firm, or even a strategic buyer like Wal-Mart.