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Still struggling, Staples is reportedly exploring a sale

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Will private investors, who helped Staples Inc. get off the ground three decades ago, step in to keep the struggling office-supply retailer from crashing?

The Framingham company is in preliminary talks with a number of private-equity firms for a potential sale, The Wall Street Journal reported Tuesday, citing people familiar with the matter. The discussions may not lead to a deal, it said.

Staples stock jumped nearly 10 percent on the news, closing at $9.51.

A company spokesman declined to comment on Tuesday.

It has been a rocky year for Staples, whose bid to merge with rival retailer Office Depot failed in May due to antitrust concerns. In the aftermath, the chain continued to close stores, and longtime chief executive Ron Sargent stepped down and was replaced by Shira Goodman, who had been president of North American operations.


Analysts and retail experts said they would not be surprised if Staples, which had its first store, in Brighton, financed by Boston’s Bain Capital in 1986, returned to the hands of private investors interested in dramatically restructuring the business.

Typically, a private equity firm buys a company, works to improve its profitability, and seeks to sell at a profit three to five years later.

Dylan Cox, a private equity analyst at PitchBook Data, said Staples could benefit from private ownership.

“With private equity comes enhanced focus on cost-cutting. That’s what they’re most famous and infamous for. They may bring in a new executive team that has new expertise” in areas like e-commerce or supply chain management, he said.

He added that any buyer would need to pay a premium above the company’s $6.2 billion market capitalization to win over existing shareholders, but declined to estimate what a likely price tag for Staples would be.

Leon Nicholas, a senior vice president at the Boston consulting firm Kantar Retail, noted that a potential buyer would probably eliminate jobs at Staples’ headquarters and speed up the pace of retail store closings.


“I can imagine people in Framingham are a lot more concerned because of this news,” Nicholas said. “But also not very surprised.”

Staples has already shed thousands of employees. At its height, the company employed 91,000 people, but that number was down to about 75,000 at the end of 2016.

Between 2014 and 2016, the company closed 290 locations. At the end of January 2017, the chain was operating 1,583 stores worldwide, down from about 2,295 at the peak. In a recent filing with the Securities and Exchange Commission, the company said it intends to shutter another 70 this year.

In the past year, Staples has also sold off its UK business to London-based Hilco Capital, as well as a controlling stake in its European operations to the private equity firm Cerberus Capital Management.

Online vendors, as well as mega-retailers Walmart and Target, have hurt Staples’ consumer business while disrupting the big-box office-supply shopping model, which the company practically invented.

Industry analysts noted that, in recent years, private equity has generally struggled to reinvigorate retail chains.

But Matt Sargent, senior vice president for retail at the consulting firm Frank N. Magid Associates in Minneapolis (no relation to Staples’ Ron Sargent), said that private investors are likely to be most interested in Staples’ commercial contract business. That’s the part of Staples that fills office supply orders for major businesses and remains a lucrative part of the company.


Sargent said he rules out Amazon.com, the online behemoth that has been increasingly focused on selling office supplies, as a potential suitor, saying that Staples had not done enough to distinguish itself from other office-supply retailers.

“I think Amazon tends to invest in brands that are on the rise or brands that are aspirational,” Sargent said. “Staples has a great legacy business, so someone might want to come in and figure out which parts are worth salvaging.”

Staples has a storied history in Massachusetts. The company was founded by the late Tom Stemberg with $650,000 in venture capital from Bain Capital and went public in 1989, reaping more than $13 million for its financiers.

In his role at Bain, Mitt Romney, the former Massachusetts governor, was instrumental in the Staples launch and routinely invoked the company’s name when he was the Republican nominee for president, using it to portray himself as a venture capitalist who had created jobs.

Bain Capital declined to comment.

Today, the path ahead for Staples is far from clear.

Joseph Feldman, a senior analyst at Telsey Advisory Group in New York, said a buyer may not appear on the landscape for years, if at all. He said he thinks that the company is adapting to a new retail climate that will require it to shrink, but Staples also has a “very good delivery business, and doesn’t get enough credit for it.”

“I don’t think Staples is sitting around waiting for someone to take them private,” he said, adding, “The world has changed. They’re just finding ways to change with it. Look at Sears, it’s still kickin’.”

Megan Woolhouse
can be reached at megan.woolhouse@globe.com. Follow her on Twitter @megwoolhouse. Adam Vaccaro can be reached at adam.vaccaro@globe.com. Follow him on Twitter at @adamtvaccaro.