Investors in Staples (SPLS) are put out of their misery by private-equity firm Sycamore Partners, which is willing to buy the challenged firm in a bet that they can stabilize the business and earn decent returns capital at this price level.
The deal creates both winners and losers within the shareholder base of Staples given the painful ride over the past few years. The sale is consistent with market conditions and the current reality, but stands in conflict with actions taken by management in the past, including capital allocation decisions.
The reality is that this is probably a fair deal as everyone knew that Staples was for sale, while Sycamore can use the solid cash flow generation of Staples to makes this deal worthwhile, as long as it can protect the remaining thin margins and managed the inevitable decline effectively.
