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Staples Rises on Report Private Equity Mulling Buyout

Staples Inc., the largest U.S. office-supplies chain, rose the most in more than two months yesterday after Fortune reported that private-equity firms including Bain Capital LLC are considering buying the retailer.

Staples climbed 3.6 percent to $11.96 in New York trading for the biggest gain since June 29. The Framingham, Massachusetts-based company’s shares have fallen 14 percent this year through yesterday.

Discussions to take over Staples are preliminary and an offer wouldn’t be made until late this year, Fortune reported, citing people it didn’t name. Staples has a market capitalization of $8.16 billion.

“It’s a low-probability event, given the size of the deal,” said R.J. Hottovy, an analyst for Morningstar Inc. in Chicago. Still, Staples is an industry leader, the world’s second-largest Internet retailer after Inc., and its delivery business would make it an attractive buyout, he said.

Staples has posted sales declines in the past two quarters as workers shift to using fewer traditional office products, like pens and folders. The retailer also relies on job creation, especially at small businesses, for revenue gains and that’s been damaged by the recession in Europe and high unemployment in the U.S. To revive growth, the company is shrinking stores and selling services and mobile computers.

Romney Connection

Potential buyers need time to arrange financing and don’t want the public-relations challenges of buying a business associated with Republican presidential nominee Mitt Romney during the campaign season, Fortune said. Romney helped found Bain Capital, which was an early investor in Staples. He also served on the board at Staples.

Owen Davis, a spokesman for Staples, declined to comment. Alex Stanton, a spokesman for Boston-based Bain, didn’t respond to a request for comment.

So-called same-store sales, a key measure of a retailer’s growth because new stores are excluded, declined 2 percent in North America and 9 percent in Europe in the quarter ended July 28. A private-equity firm would probably shed the retail stores and focus on the online and delivery units, according to Hottovy.

“There is some value” in those assets, Hottovy said.

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