Staples, Office Depot Merger May Finally Happen… Sort Of
According to multiple reports floating around, Staples and Office Depot could head back to the negotiating table in the very near future. But potential M&A terms would be a heck of a lot different than what anyone might’ve expected roughly a year ago.
Staples, which recently agreed to be purchased by a private equity firm for $6.9 billion, has held talks to spin off its 1,500 retail locations to its main retail rival. That kind of deal, which would need to be negotiated by Sycamore Partners—Staples’ new owner—would make Office Depot the only bog-box office supplies chain.
“It would be the end of an era,” Craig Johnson, president of retail consultancy Customer Growth Partners, recently told the New York Post. “This is a company that helped create the idea of a superstore. Unfortunately, the concept of a superstore has come and gone.”
According to the Post’s report, the Sycamore offer to take Staples private came after Staples disclosed in a public filing that it received an offer from a “Party A” to purchase its North American retail locations for somewhere between $625 million and $700 million. “Party A” was Office Depot. Staples opted to go with Sycamore in a buyout that valued the company at 10 times the offer made by Office Depot.
“The Sycamore Partners’ team shares Staples’ entrepreneurial spirit and long-term vision,” Shira Goodman, Chief Executive Officer and President, Staples, Inc., said in a statement at the time of the acquisition announcement. “This transaction will enable us to drive greater value for our customers and immense opportunity for our business.”
Sycamore, though, has signaled its willingness to spin off the retail portion of Staples’ business, which is what could bring the two parties back to the table. According to the Post’s sources, executives at Sycamore are more concerned with controlling Staples’ lucrative business selling office supplies in bulk to major corporate clients.
So, the long awaited merger—consolidation, really—between Office Depot and Staples could finally happen. But it may end up looking totally different from what we thought.