Bain Capital Staples Buyout

September 14, 2012

There are rumors that Bain Capital is considering a buyout of Staples (SPLS), the office supplies chain that actually received initial backing in its early days from Bain.  However, there is also a lot of doubt as to the seriousness of such talks, especially during a heated presidential race involving former Bain Capital founder Mitt Romney.

Still the rise in Staples share price was attributed to talk of a possible Bain-led buyout of the firm.  Talks are only in the preliminary stages but industry analysts suggest the company would be attractive to buyout firms and would make for a large multi-billion dollar buyout that has been somewhat rare since the financial crisis.  Mr. Romney has held the office supply giant as a testament to Bain Capital’s positive impact on jobs and the economy and as well as being an early investor in the firm, he served on the board at Staples.

Discussions to take over Staples are preliminary and an offer wouldn’t be made until late this year, Fortune reported, citing people it didn’t name. Staples has a market capitalization of $8.16 billion.

“It’s a low-probability event, given the size of the deal,” said R.J. Hottovy, an analyst for Morningstar Inc. (MORN) in Chicago. Still, Staples is an industry leader, the world’s second-largest Internet retailer afterAmazon.com Inc. (AMZN), and its delivery business would make it an attractive buyout, he said.

Staples has posted sales declines in the past two quarters as workers shift to using fewer traditional office products, like pens and folders. The retailer also relies on job creation, especially at small businesses, for revenue gains and that’s been damaged by the recession in Europe and high unemployment in the U.S. To revive growth, the company is shrinking stores and selling services and mobile computers.

Potential buyers need time to arrange financing and don’t want the public-relations challenges of buying a business associated with Republican presidential nominee Mitt Romney during the campaign season, Fortune said. Romney helped found Bain Capital, which was an early investor in Staples. He also served on the board at Staples.  Source

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