Office Depot Open To Retail Business-only Acquisition By Staples, Is Selling CompuCom

Office Depot, in an open letter, says it acknowledges Staples’ primary interest in acquiring its retail and ecommerce business, and said that it has already initiated the process to sell its CompuCom business as part of a strategic review of the business.

Office Depot told Staples owner Sycamore Partners that it is open to explore the possibility of Staples acquiring Office Depot’s retail business, and that it is open to selling its non-retail business separately to make the proposed acquisition work.

Office Depot on Tuesday also said in an open letter to Staples that it has already initiated the process of selling its CompuCom system integration business as part of a strategic review of its businesses launched in November.

The letter, which can be read here, was written in response to a January 11 proposal by private equity firm Sycamore Partners, which acquired Staples in mid-2017, to acquire Office Depot in a deal worth $40 per share, or about $2.1 billion.

[Related: 5 Things To Know About Staples’ Bid To Acquire Rival Office Depot]

However, Staples made it clear in its original bid that it is looking only at Office Depot’s retail and consumer-facing e-commerce operations.

“We may increase our proposed valuation (i) for logical strategic divestitures that ODP may execute to unlock value, such as the sale of its CompuCom business and/or (ii) if ODP conducts a comprehensive sale process for its U.S. commercial business unit (the ‘B2B Business),” Staples wrote.

An Office Depot spokesperson responded to a CRN request for more information that the letter is for now the only statement the company will make. Staples did not respond to a CRN request for more information by press time.

Office Depot, in its letter to Staples, which was signed by Office Depot Chairman Joseph S. Vassalluzzo, said it has reviewed Staples offer from a financial and legal perspective, and noted that Staples is primarily interested in its retail and consumer-facing ecommerce operations.

“To accomplish that, your proposal, among other things, contemplates the divestiture of our commercial business unit (the B2B Business) to a hypothetical third-party buyer that has yet to be identified, on terms yet to be proposed, as well as the sale of our CompuCom IT services business,” Office Depot wrote.

CompuCom is a large national systems integrator which Office Depot in 2017 acquired for about $1 billion. Office Depot’s business-to-business division, called the Business Solutions Division, is focused on non-consumer business sales.

Office Depot said that, instead of being acquired, it is pursuing a “comprehensive strategy” to offer significant value to its shareholders without introducing material regulatory risk.

That strategy includes building on its B2B strategy and other growth initiatives, and moving forward on a sale of CompuCom, a move the company in November said was part of a strategic review of that business. Office Depot’s board of directors have already initiated the process of selling CompuCom, the company said.

“In addition, we are open to combining our retail and consumer-facing ecommerce operations with Staples under the right set of circumstances and on mutually acceptable terms. Indeed, we believe that such a transaction could be executed more efficiently and with far greater certainty and less regulatory risk than your proposal. It would also help maintain competitiveness against nontraditional retailers and optimize ongoing choices for consumers,” Office Depot wrote.

Such a combination could be either a joint venture between the two, or the acquisition of Office Depot’s retail and consumer-facing ecommerce operations.

Either deal would lessen the regulatory risk of the acquisition compared to Staples’ acquisition of all of Office Depot, the company said.