Staples Investors Balk at $6.9 Billion Valuation

(CN) – Just over a month after Staples announced a $6.9 billion buyout offer from private-equity firm Sycamore Partners, investors claim in a federal class action that the struggling office-supply chain can do better.

Lead plaintiff Raymond Haag brought the Aug. 4 complaint in Boston, noting that the Delaware-based retailer maintains its principal executive offices in Framingham, Massachusetts.

The complaint comes roughly a month after Staples announced on June 28, that New York-based Sycamore would buy out its stock at $10.25 a share, a 12 percent premium on the struggling retailer’s closing price.

Claiming that this offer undervalues the company, however, Haag noted that Sycamore itself offered $11 a share on June 11.

“The analyses performed by the company’s financial advisers, Barclays Capital Inc. and Morgan Stanley & Co., confirm the inadequacy of the merger consideration,” the complaint states. “For example, Morgan Stanley’s Discounted Cash Flow Analysis yielded implied per share values for the Company’s common stock as high as $12.79, and Barclays’ Discounted Cash Flow Analysis yielded implied per share values as high as $12.40.”

Haag also objects to the $171 million deal’s termination fee, and he claims the company’s proxy statement omits material information regarding key inputs for the valuation method.

Sycamore’s offer was announced just a year after antitrust concerns forced Staples to call off a $6.3 billion merger plan with Office Depot.

Staples CEO Shira Goodman said in a statement that the buyout by Sycamore will allow Staples more flexibility to “continue to transform to meet changing customer needs in an ever-evolving and competitive marketplace.”

Staples shares traded Monday at $10.18, just short of the offer price.

Lead plaintiff Haag is represented by Mitchell J. Matorin in Wellesley, Massachusetts, and of counsel Brian D. Long with Rigrodsky & Long in Wilmington, Delaware.

Staples spokesman Mark Cautela declined to comment on pending litigation.

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