Staples to be acquired by Sycamore Partners for $6.9B

Dive Brief:

Staples is being acquired by private equity firm Sycamore Partners for approximately $6.9 billion, according to a company statement issued Wednesday evening. It is Sycamore’s biggest deal yet, according to Bloomberg.
Under terms of the merger agreement, Staples’ stockholders will receive $10.25 per share in cash, a premium of roughly 20% before trading was halted on April 3 as rumors of a sale circulated. The transaction is expected to close no later than December 17.
“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, in a statement. “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.”

Dive Insight:

In one of the biggest retail acquisitions of 2017 so far, Sycamore Partners plans to take Staples private. The acquisition by Sycamore Partners would give Staples some much-needed breathing room to complete a turnaround without scrutiny from Wall Street investors.

“The opportunity for retailers to go private is to give them the space they need to reinvent their brands, redo their store formats, and emerge a much stronger retailer," Steve Barr, a partner and the US Retail and Consumer Sector leader at PricewaterhouseCoopers, previously told Retail Dive.

Rumors that the company was looking for a buyer have been circulating for months. In the wake of declining sales, Staples recently announced a strategy that hinges on further penetrating the business-to-business market rather than direct-to-consumer sales — a move that comes just as Amazon is moving aggressively into the same area.

The retailer is attempting to shift sales from stores to the online channel and hopes to reduce brick-and-mortar sales from 40% to 20% by 2020.

Sycamore has historically acquired retailers with an eye toward turnaround — including department store chain Belk — and Staples is no exception. “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, in a statement. “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.”

But the problems faced by Staples, and the office supply sector in general, won't go away. Amazon continues to grow Amazon Business and now boasts roughly 400,000 accounts and a recent survey by Frank N. Magid shows that nearly a quarter (23%) of office users are relying on Amazon for frequent purchases, according to AdWeek. Combined with Amazon Web Services — which generated $3.66 billion in revenue during the first quarter, according to CNBC — any merchant in the office supply category faces stiff competition.

Staples previously tried — and failed — to merge with Office Depot in 2015 to create a stronger competitor to the growing Amazon threat, but after more than a year of regulatory scrutiny, the deal was dashed by the Federal Trade Commission. CEO Ron Sargent resigned in the aftermath and Staples has struggled to find firm footing. Sales have steadily declined and the company reported a first quarter drop of 4.9% in May and announced it plans 70 store closures over the year.