Please ensure Javascript is enabled for purposes of website accessibility

Why Staples, Inc. Stock Rose 11% Last Month

By Jeremy Bowman - Jul 9, 2017 at 7:20AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The office-supply retailer has agreed to be acquired, sending the stock up at the end of June.

What happened

Shares of Staples, Inc. (SPLS) gained 11% in June, according to data from S&P Global Market Intelligence, as the office-supply retailer agreed to be acquired by Sycamore Partners, a private equity firm. 

A Staples paper box

Image source: Staples.

The stock surged on June 28, the day the deal was announced as the chart below shows. 

SPLS Chart

SPLS data by YCharts.

So what

Staples agreed to sell itself to Sycamore Partners for $6.9 billion, or $10.25 a share, in an all-cash deal. Reports had spread back in April that Staples was seeking a buyer after the Federal Trade Commission blocked its proposed merger with Office Depot (ODP 3.76%).

The buyout price was approximately 20% higher than where Staples was trading before news reports first broke. 

The deal comes after Staples had tried in vain to repair its flailing retail business by closing stores and attempting to merge with Office Depot. However, the company still has a prosperous commercial business, delivering directly to businesses, which drove significant profits for Staples and made it attractive to a buyer like Sycamore.

Now what

Staples' sale is the latest evidence of the troubles across the retail industry as a number of companies have declared bankruptcy or are seeking buyers. With its retail business waning, selling itself seemed like the right move as the stock was only likely to head lower as sales continued to evaporate. Staples is currently trading about 2% below the buyout price, indicating some skepticism that the deal, which is still awaiting shareholder approval, will go through. Some shareholders have said that the price is too low, including major holder Richard Pzena, CEO of Pzena Investment Management. Based on historical retail multiples, the Staples acquisition is cheap, but the price seems fair, considering that its industry is in decline.

Assuming the deal goes through, it is expected to close by the end of the year. Analysts believe Sycamore could attempt another merger with Office Depot.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Staples, Inc. Stock Quote
Staples, Inc.
SPLS
The ODP Corporation Stock Quote
The ODP Corporation
ODP
$31.49 (3.76%) $1.14

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
323%
 
S&P 500 Returns
112%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/06/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.