Reports are swirling that the company, which has seen its stock price lose nearly 20% year-to-date and over 44% during the last 5 years, is the target of private equity investors looking to take the company private sometime later this year or early next year.
The timing is viewed as critical due to one of the names mentioned as a takeover bidder: Bain Capital, Republican presidential nominee Mitt Romney’s famous investment firm, is viewed as one of the firms showing interest in a bid. Bain was an early investor in Staples, having provided $4.5 million to Staples co-founders Leo Kahn and Thomas Stember in 1986 to open an office supply supermarket in Brighton, Massachussets.
The timing is also important due to the potential size of the deal: Staples’s market capitalization is around $8.16 billion, and according to Fox Business, with a 20% premium the buyout price could reach $9.6 billion, of which $2.6 billion would be the equity piece. Private equity leveraged buyouts are under some stress as evidenced by the difficulty suggested by Best Buy’s efforts.
However unlike Best Buy, Staples is better positioned even in a difficult market. The company is the world’s second largest internet retailer behind Amazon (NASDAQ:AMZN), and despite slowing revenues due to a slower economy, the company is profitable and generates positive cashflow.
The buyout news lifted Staple’s shares up nearly 4% on Thursday and the rally continued into early trading on Friday where shares are up another 4%.
-Marc Bastow is and Assistant Editor at InvestorPlace.com. As of this writing he did not hold a position in any of the aforementioned securities.