Per Reuters, Sycamore Partners, a private equity firm is in negotiation with Staples, Inc. (NASDAQ:SPLS) to acquire its business. The report suggests that the value of the deal could go beyond $6 billion.
Sycamore is trying to conclude a debt financing for the Staples buyout. Following the news, the company’s shares jumped nearly 5% in after-hour trading session yesterday.
In fact, in the past three months, the company’s shares have gained 1.6%, outperforming the Zacks categorized Retail-Miscellaneous/Diversified industry’s decline of 4.6%.
Analysts pointed out that demand for office products (paper-based) has been decreasing due to technological advancements. Smartphones, tablets and laptops are fast emerging as viable substitutes for paper-based office supplies.
Moreover, there has been persistent weakness in the office products sector. Further, stiff competition from online retailers such as Amazon.com, Inc. (NASDAQ:AMZN) has been playing spoilsport for the company.
Earlier, U.S. District Judge Emmet Sullivan has ruled out the merger of Staples and Office Depot, Inc. (NYSE:ODP). According to the FTC, the deal would have lowered competition nationwide, resulting in price hikes and fewer options for large corporate houses that usually make bulk purchases.
However, if the merger had materialized, the two companies would have created a retail chain with approximately $36 billion in annual revenues and thousands of stores.
After termination of the merger with Office Depot, Staples has undertaken a strategic review to bring the company back on growth track. It is streamlining operations to enhance productivity and performance in North America by expanding services, strengthening customer base, shutting down underperforming stores and decreasing fixed costs. In a bid to acquire new customers, it intends to increase offering of products as well as services beyond office supplies.
Staples currently carries a Zacks Rank #3 (Hold).
Another Retail Stock to Consider
A better-ranked stock in the retail space is Build-A-Bear Workshop, Inc (NYSE:BBW) sporting a Zacks Rank #1 (Strong Buy). The stock has a long-term earnings growth rate of 22.5%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Looking for Ideas with Even Greater Upside?
Today’s investment ideas are short-term, directly based on our proven 1 to 3 month indicator. In addition, I invite you to consider our long-term opportunities. These rare trades look to start fast with strong Zacks Ranks, but carry through with double and triple-digit profit potential. Starting now, you can look inside our home run, value, and stocks under $10 portfolios, plus more.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report