martinwolf
Transaction Analysis
Sycamore Partners in Talks to Buy Staples
Financial Information*
- Financial Terms Not Disclosed
Transaction Facts
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According to Reuters, New York-based private equity firm Sycamore Partners is in advanced negotiations to acquire Staples after beating out other firms in an auction. While both parties declined to comment, sources say Sycamore is in the process of finalizing a debt financing package in a deal that could top $6B.
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Shares of Staples Inc. surged 5% in after-hours trading late Wednesday and 7% today after the report was released.
A New Direction
- Pick and Choose: The Wall Street Journal first reported the retailer's discussions with private equity firms in April. Then in May, Staples rejected what it saw to be a low takeover offer from Cerberus Capital Management, a private equity firm that had agreed to acquire a majority stake in Staples' European units back in December.
- International Exit: As part of its strategy to focus on North America, Staples has sold off most of its international operations. Hilco Capital acquired the retailer's UK division in November, Cerberus acquired the remaining European divisions in February, and Platinum Equity acquired the Australia and New Zealand divisions in April. Staples expects its remaining businesses in Asia and South America to be sold within the next 12 months.
- A Great Past: Staples was first financed with Bain Capital in 1986 and grew massively after it went public in 1989. In 2007, Staples had a market cap of $15.3B, nearly four times greater than that of Office Depot. However, the combined market cap of Staples and Office Depot by mid-2016 was half of that of Staples alone in 2007. Reflecting broader retailer struggles, the office supply industry's 2016 revenue of $8.3B was half of the $16.6B reported at its peak in 2007.
- New Alternative: Staples currently has the largest market share of office supply stores in the US at 48%, but the company has not seen growth in a decade, reporting its fifth-straight drop in annual sales in April. At its height, Staples operated nearly 2,300 stores, but today the office supply giant operates only 1,500, with an additional 70 to close this year. As sales of office supply stores continue to dwindle, going private could give Staples the room to develop a new strategy, especially following the blocking of its proposed merger with Office Depot by a federal judge last year.
- Stronger Services: Currently, Staples seems to be working on building their capabilities in four main categories: facilities and breakroom supplies, furniture, technology solutions and promotional products. By doing so, the company has been investing in their Technology Solutions, Data Center Management, eCommerce and B2B platforms as well. The company sold its managed services unit, Thrive Networks, to telecom services player MetTel in September 2014 (we advised Staples in the transaction).
- Retail Specialty: Unlike many private equity firms, Sycamore specializes in retail and consumer investments. With more than $3.5B in capital under management, Sycamore recently acquired NBG Home in April and acquired The Limited's brand and related intellectual property in February. One of its deals has recently taken a wrong turn; the nation's largest chain of dollar stores, The Dollar Tree Inc., sued the firm earlier this month, alleging siphoned funds and a tarnished brand reputation.
For more information about this potential transaction,
click here to read the Reuters report.
*Financial Information from S&P Capital IQ.
martinwolf was
not the advisor in this transaction.
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With offices in the San Francisco Bay Area and New York, martinwolf is a leading M&A Advisory focused on middle market companies in the IT Services, IT Supply Chain, IT-Enabled Business Process Outsourcing and Software as a Service (SaaS) space. Since 1997, our team has completed more than 150 transactions in over 20 countries and sold seven divisions of Fortune 500 companies. martinwolf is a member of FINRA and SIPC. For more information, visit www.martinwolf.com. To learn more about martinwolf, contact Matthew Putzulu at [email protected]. © martinwolf 2017 |
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