Fortune reported late on Thursday that private equity firms are interested in taking Staples private. The hope was enough that Staples saw its stock close up about 4% at $11.96 against a 52-week range of $10.57 to $16.93. There is just one problem. Staples has a market value of almost $8.2 billion, and that is while it is a depressed stock. CNBC is also talking the story up this morning.
At the start of 2010, the share price was north of $25 per share. It was not until after the first few months of 2011 that the Staples story really began to run into trouble and it quickly slid from $21 to $15. That 52-week low was seen only in recent weeks.
A buyer will have to pay a premium, and perhaps a significant premium, to buy Staples. Our guess would be a $15 minimum price just to keep shareholders from raiding the stores and stealing the goods to keep the company from stealing their money in a low-ball sale. Unfortunately, Staples may require $20 or higher just to make some shareholders whole in a buyout.
The long and short is that it will take more than $10 billion to acquire Staples. It could even take $13 billion or more. If private equity firms really want into the low-growth or no-growth office supplies space, maybe they should just focus on OfficeMax Inc. (NYSE: OMX) with its $616 million valuation or Office Depot Inc. (NYSE: ODP) with its $672 million valuation.
Anything is possible, and these very low rates may allow private equity groups to form “club deals” to pay $10 billion or more for buyouts. Still, there may not be any “Easy Button” for a private equity buyout of Staples.
JON C. OGG
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