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Staples agrees to $6.9 billion buyout

Rick Wilking/REUTERS, file

Staples Inc. has agreed to be acquired by the investment firm Sycamore Partners for about $6.9 billion, the latest attempt by the Framingham-based retailer to end its downward spiral of shrinking sales, store closings, and layoffs.

The deal, announced Wednesday, highlights Staples’ attempts to survive in an office-supply market upended by the rise of e-commerce and an increasingly digital workplace.

The company opened its first store in 1986, with backing from Boston’s Bain Capital, and expanded steadily to become the biggest player in the office-supply market. But competition from online retailers like Amazon.com has eaten into sales and profits, forcing Staples to retrench.


Sycamore has experience taking on troubled retailers. It owns the Belk department store chain, the Limited, Torrid, Nine West, and Hingham-based Talbots, which it bought in 2012. The New York firm is betting that Staples will have more flexibility to revamp its operations without the pressure that comes with having stock market investors.

“This transaction will enable us to drive greater value for our customers and immense opportunity for our business,” Staples’ chief executive, Shira Goodman, said in a statement.

Private equity firms like Sycamore tend to buy a company with the aim of improving its operations and selling the company in three to five years. It’s not usual for buyouts to result in some layoffs, though Staples’ statement did not mention what impact the deal might have on its workforce, which includes about 3,000 people at its Framingham headquarters.

No leadership or strategy changes have been announced as a result of the deal, the largest ever done by Sycamore. The firm praised the strength of the Staples brand and indicated it would let Goodman carry out her turnaround plans.

“We have tremendous confidence in CEO Shira Goodman and great respect for the Staples management team,” said Stefan Kaluzny, managing director of the private equity firm.


Analysts said Staples faces an uphill battle, even as a private company.

“This doesn’t change the industry dynamics or the pressures the retailer faces,” said Seema Shah, an analyst at Bloomberg Intelligence.

“The risk is, of course, is that sales and margins continue to be under pressure and that the retailer struggles to service its debt,” she said.

Staples’ shareholders will get $10.25 per share in cash under the deal, which received unanimous approval from the company’s board. The $10.25 per-share price represents a 20 percent premium from the company’s closing price on April 3, before news stories began appearing about a potential deal. The shares traded as high as $19 in early 2007. But the price fell considerably in the months following the announcement in February 2015 that the company had a deal to buy Office Depot.

The latest deal needs approval by Staples shareholders.

The sale can be traced back to May 2016, when a federal judge halted Staples’ bid to acquire Office Depot, its biggest US rival, for roughly $6 billion. Office Depot, in turn, was still digesting its purchase of the number three office-supply company, OfficeMax.

The judge agreed with the Obama administration’s Federal Trade Commission that combining the two remaining national office-supply chains would put too much market power in the hands of one company. Former CEO Ron Sargent pursued the deal vigorously — a go-big or go-home effort to shore up two old-school retailers with declining revenue and to prepare for anticipated competition from Amazon.com. The judge deemed that Amazon’s efforts in the office-supply market were too nascent at the time to constitute a legitimate market threat.


With Sargent’s deal-of-a-lifetime dead, the longtime CEO decided to step aside, to make way for Goodman, a protégé.

Under Goodman, the company focused instead on building up a sales force that targeted more mid-size businesses while paring back the Staples empire to just North America. During the past year, the company has sold off its operations in Europe, Australia, and New Zealand. More recently, it discontinued operations in South America and China.

As a result, almost all of the company’s 60,000 employees are in North America. Staples still has about 1,200 US stores and about 300 in Canada.

Goodman arrived at Staples in the 1990s after working with the company as a consultant at Bain & Co.; her project focused on whether Staples should explore the delivery business. (She said yes.) Now, much of the company’s success hinges on whether it can expand delivery operations and fend off Amazon in the process.

For years, Staples has been scaling back its physical footprint, having shuttered 350 stores in the past five years. In March, it announced plans to close 70 more.

The company has struggled with declining revenues and profits for years, and in May reported first-quarter revenue of $4.1 billion, down 4.9 percent from a year earlier. It saw a net loss of $815 million, largely from discontinued operations, compared with net income of $41 million in the prior year’s period.


But in an effort to make better use of its brick-and-mortar stores, Staples partnered with the co-working startup Workbar to create shared office spaces. Staples now hosts three co-branded workspaces, in its Brighton, Danvers, and Norwood stores. The company also recently launched a series of television ads that aim to shift its focus away from retail storefronts and more to serving business managers.

Staples’ start dates back to when its founder, grocery store executive Tom Stemberg, struggled to find a roll of typewriter ribbon over the Fourth of July weekend in 1985.

Stemberg opened his first store less than a year later.

And Bain Capital helped take the company public in 1989.

Material from Bloomberg News was used in this report. Janelle Nanos can be reached at janelle.nanos@globe.com. Follow her on Twitter @janellenanos. Jon Chesto can be reached at jon.chesto@globe.com. Follow him on Twitter @jonchesto.