Office supplies giant Staples eyes sale to private equity firm
Staples Inc. shares shot up as much as 15.5 percent yesterday after reports that the challenged office supplies retailer is talking with private equity firms about a possible sale.
The buyout discussions come just under a year after the Framingham chain shelved a $6.3 billion merger with rival Office Depot Inc., when a federal judge ordered a temporary halt to the deal to allow a Federal Trade Commission review. Staples stocks closed at $9.51 yesterday, up 9.82 percent, after reaching $10.
Staples is in early talks with a small number of potential privateequity bidders, The Wall Street Journal first reported. Staples, which had a market value of about $5.65 billion as of Monday, declined comment. Its shares have more than halved in three years. Going private could ease pressure on Staples as it continues a costcutting restructuring that includes a narrowed focus on North America after selling its U.K., Australian and New Zealand businesses, and all but 15 percent of its European operations.
Staples has been targeting deliveries to businesses with 10 to 200 employees, and closing stores in the United States and Canada, where it has 1,559 locations.
The No. 1 office supplies chain reported its fifth consecutive decline in annual sales, ending 2016 with a $459 million net loss. It’s been contending with a digitalized workforce and increasing competition from online retailers including Amazon Business and big-box chains such as Wal-Mart Stores Inc.
A private equity buyer would likely further slash Staples’ store base, said Susan Assadi, research director at Gimme Credit.
“Although Staples carries little debt, its fixed obligations are considerable, and most of its free cash flow has been returned to shareholders, leaving little opportunity for credit profile improvement,” Assadi said.