Staples Inc., the office-supply chain that’s pursuing an e-commerce makeover, rose the most in more than four years after a published report that it’s in takeover talks.
The company is in early discussions with a small number of private equity firms, The Wall Street Journal reported today. Staples currently has a market valuation of about $6.4 billion. With a typical takeover premium, the company could fetch a price of $7 billion or more, the Journal said.
The shares gained as much as 15% this morning to about $10 in New York, marking the biggest intraday increase since February 2013. They had been down 4.3% this year before the rally.
The talks come less than a year after Staples was thwarted in an attempt to make its own acquisition. A federal judge blocked Staples’ $6.3 billion takeover of Office Depot Inc. in May an anti-trust grounds, and the two sides walked away from the deal. Staples, based in Framingham, Massachusetts, declined to comment on the Journal report.
Morgan Stanley, the financial services and investment banking firm, surmises that a potential buyer of Staples will try to eventually merge Staples with Office Depot. And with Amazon Business continuing to expand beyond $1 billion a year in sales, experts say a second attempt at a merger between Staples and Office Depot might be easier to get by government concerns about anti-trust matters.
A buyout might allow the company to revamp its operations out of the public spotlight. The three-decade-old business is already at a crossroads, with sales declining and Amazon.com Inc. looming over its industry. As part of its turnaround plan, CEO Shira Goodman plans to boost its sales from internet orders to 80% by 2020 from 60% now. Much of those internet sales will be through Staples Business Advantage, the company’s B2B unit that includes StaplesAdvantage.com and Quill.com.
When reporting on Staples’ financial performance for the fourth quarter and year ended Jan. 28, Goodman said the company would increase its focus on selling a wide range of products in addition to its traditional office supplies like paper and pencils—expanding in such growth categories as office furniture, breakroom supplies and technology products. “Staples Business Advantage is the cornerstone of our long-term growth strategy,” Goodman told analysts on the company’s year-end earnings call. “Within Staples Business Advantage, our primary focus is on the $80 billion mid-market customer segment. And we know that what’s good for these customers is often good for business customers of all sizes.”
Staples is No. 22 in the B2B E-Commerce 300, which ranks companies on their annual web sales; Office Depot is No. 42 and Amazon Business, No. 104.
Staples also aims to extract more growth from a market it considers neglected: small businesses. It’s working on a national marketing campaign, adding business services and teaming up with the co-working company Workbar—a partnership that is letting people set up offices within Staples stores.
The idea is to become a “partner for business,” Goodman said in an interview earlier this year. “We have to move the brand.”
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