Well known office supplies company, Staples, Inc. (NASDAQ: SPLS) has agreed to sell itself to private equity firm, Sycamore Partners for $6.9 Billion. This firm specializes in retailers and already owns likes of Talbots, Hot Topic, and the Limited.
Over the past few years, Staples has been declining in sales and gross profits with stores shrinking in numbers. To remain competitive, they merged with Office Depot but this ended last year due to the blockage by a federal judge. While competing with online retailers such as Amazon, merchants such as Target and Walmart, warehouse clubs such as Costco, and electronics and computer retail stores such as Best Buy, Staples wanted to focus primarily on maximizing profitability and reducing risk in retail and international businesses.
After planning on closing 70 stores in North America this year and losing faith in business, Staples’s board and management decided to sell the company. Staples reportedly earned $18.2 billion in revenue last year, which was down $21.1 billion five years ago. They still have a large and potentially profitable opportunity being that they have very little debt totaling to about $1 billion in total.
Following this acquisition, Sycamore may have a hard time returning Staples to the public markets. Investors would need a better perspective in buying shares in the future due to loss of faith in the business right now. Sycamore might have plans to try to sell Staples to a different private equity firm or even another buyer like Walmart.