To Finance Deal, Sycamore Takes Knife to Staples -- WSJ
June 30 2017 - 2:02AM
Dow Jones News
By Matt Jarzemsky and Dana Mattioli
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the US print
edition of The Wall Street Journal (June 30, 2017).
Sycamore Partnersintends to split Staples Inc. into three to
help fund its $6.9 billion purchase of the office-supply seller, in
another sign of the challenges facing the retail industry.
The plan calls for Staples to be divided into three separately
financed entities, according to people familiar with the matter:
U.S. retail; Canadian retail; and corporate-supply businesses. The
three groups will remain under the same corporate umbrella.
The move is designed to make the leveraged buyout of Staples,
announced Wednesday, an easier sell to bond and loan investors
whose appetite for retail names has soured as the industry's
prospects have waned. Their appetite will be crucial to financing
the deal, the largest LBO announced this year.
UBS AG, Bank of America Corp. and other Wall Street banks plan
to arrange bonds and loans backing only the Staples unit that
distributes paper, pens and other supplies to large business and
government customers, the people said. The delivery operation is
the largest and seen as the crown jewel of Staples.
Sycamore plans to help fund the Canadian retail business with
debt from asset manager KKR & Co., the people said. Wells Fargo
& Co. will finance the U.S. retail segment with a loan backed
by the chain's assets, they said.
Sycamore's approach to breaking up Staples into different
businesses and financing them separately is similar to the
private-equity firm's deal to buy another beleaguered retailer,
Jones Group Inc., in 2014. After Sycamore bought Jones, it split
the company into four independent operating entities: Nine West,
Jones New York, Kasper Group and a jeans company. It also took two
Jones brands -- Stuart Weitzman and Kurt Geiger -- and made them
into other independent companies. Sycamore later sold Stuart
Weitzman to handbag maker Coach Inc. and Kurt Geiger to
private-equity firm Cinven.
Drew FitzGerald contributed to this article
Write to Matt Jarzemsky at matthew.jarzemsky@wsj.com and Dana
Mattioli at dana.mattioli@wsj.com
(END) Dow Jones Newswires
June 30, 2017 02:47 ET (06:47 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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