For private equity investors, one of the worst sectors has been retailing. Just look at some of the failed deals: Goody's, Linens 'n Things, Mervyns, and so on.
Despite the carnage, it looks like private equity operators are seeing opportunity in the sector. For example, CCMP Capital Advisors recently agreed to pay $202 million for defunct Eddie Bauer.
And, this week we got another deal: BC Partners announced a $350 million direct investment in Office Depot (NYSE: ODP).
With the recession and stiff competition -- especially from behemoths like Wal-Mart (NYSE: WMT) -- the fortunes of the company have been rough. So, Office Depot has worked aggressively to restructure the operations, such as by closing down stores and slashing headcount. So, the cash infusion will certainly be helpful.
BC Partners will receive convertible preferred shares, which have a 10% dividend rate. Actually, the structure is known as a PIPE (a private investment in public equity). Typically, these are rare for private equity firms, which usually want to purchase full ownership. But given the difficulties in raising debt, the PIPE structure may become much more common.
In early trading, Office Depot's shares were up 3.6% to $3.99.
Tom Taulli is the author of various books, including The Complete M&A Handbook
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