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What To Make Of The Staples Buyout

Jul. 03, 2017 10:25 AM ETStaples, Inc. (SPLS)15 Comments


  • Staples will be bought out at $10.25 per share.
  • Some share price appreciation and the company's dividends provide total return potential until the deal closes.
  • Holding Staples' shares until the deal closes has a good chance of beating the broad market.


Staples (NASDAQ:SPLS) getting bought out gives current owners two options: Hold until the deal closes, or sell at the market. I believe holding the shares until the deal closes has a good chance of delivering market-beating returns.

The above golden piggy bank could be a symbol for the cash Staples' owners will be receiving once Sycamore closes the acquisition of the company, which has been announced late last week.

With the deal valuing Staples at $10.25 per share, let's look at the good thing first:

SPLS data by YCharts

Everyone who bought Staples' shares over the last year will be able to close the position with a positive total return, although that is not necessarily true for those who bought earlier -- basically everyone who bought in 2014 or 2015 and has been holding the company's shares since will have lost money once the deal closes.

With Staples trading at $10.07 right now, investors are standing before a choice: Either sell at the market for immediate gains and locking in the profits, or waiting for the acquisition to close, for a higher absolute return (although that return is not guaranteed yet).

Let's look at the outcomes for an investor holding the company's shares until the deal closes:

Deal closes in
Share price appreciation
Total return (absolute $ amount)
Total return (annualized)
3 months
6 months
9 months
12 months

We see that, as long as the deal closes over the next year, investors will see a total annualized return of at least mid single digits, which is not bad at all. There is, however, some risk that the deal does not happen, e.g. due to regulatory authorities not allowing the takeover (however I believe that that risk

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