In a deal that values office supply company Staples at $6.9 billion—a fraction of the $19 billion it was worth seven years ago—Sycamore Partners is coming in to rescue the distressed retailer.

Another victim of the growing trend for buying online, Staples has been bleeding money in recent years: annual sales have shrunk for five years, and the company has closed 450 stores. Add to that the fact that its merger with rival office supply company Office Depot was thwarted by federal antitrust regulators, and it’s clear that Staples is a company in trouble.

The deal with Sycamore Partners is a bit of a surprise, because in the wake of a record number of retail bankruptcies, PE firms have generally shied away from buying U.S. retailers. But Sycamore’s deal shows that some buyout firms are distinguishing between fashion retailers, which are beholden to the vagaries of consumer tastes, from retail stores with a niche and rich cash flow like Staples.

Staples has the largest share of office supply stores in the U.S. and generated $889 million of adjusted free cash flow in 2016.

Sycamore said it would pay $10.25 per share, in cash, for the office supply company. The deal is expected to close by September. Sycamore has a reputation for taking bets on retail investments that others might pass up. It has made investments in department store operator Belk, discount retailer Dollar Express, and specialty retailer Hot Topic.

Shira Goodman will remain Staples’ CEO. Sycamore said it has “tremendous confidence” in Goodman and “great respect” for Staples’ management team.

This isn’t the first time Staples has been owned by a private equity firm. It was backed in the 1980s by Bain Capital, which made a huge amount of money when Staples went public in 1989.

Sycamore is going to organize Staples along three lines: its delivery business, which remains strong; its weaker retail business; and its business in Canada.

UBS Investment Bank, BofA Merrill Lynch, Deutsche Bank, Credit Suisse, Royal Bank of Canada, Jeffries, Wells Fargo, National Association, and Fifth Third Bank are providing debt financing for the deal

Photo: a Staples store in Sacramento, California. Credit: Sergey Yechikov /