Staples Makes $2.1B Bid To Buy Office Depot, Considers Divesting CompuCom

Staples indicated that it thinks Office Depot would have a greater value if it divested itself of either its CompuCom system integration business or its Business Solutions Division, which focuses on the B2B market.

The parent company of office supply retailer Staples is making yet another attempt to acquire rival Office Depot in a $2.1 billion deal that proposes the eventual divestiture of Office Depot’s business-to-business-focused holdings, including IT managed service provider CompuCom.

Framingham, Mass.-based USR Parent, the corporate name of Staples, on Monday wrote to the board of directors of Boca Raton, Fla.-based Office Depot a proposal to acquire that company for $40 per share in cash, or a total of about $2.1 billion. That, according to Staples, is a 61-percent premium over Office Depot’s average closing share price over the last 90 trading days.

“Staples believes that its all-cash transaction is a compelling value proposition for ODP‘s stockholders that offers a high degree of certainty and is superior to the intrinsic, standalone value of ODP,” wrote Stefan Kaluzny, on behalf of the board of directors of USR Parent. Kaluzny is managing director of Sycamore Partners, the New York-based investment firm which owns USR Parent.

[Related: Office Depot’s Push To Emphasize B2B Over Retail Paying Off]

After Staples’ offer was made public, Office Depot, with its ticker symbol of “ODP,” on Monday replied via a press release stating that it has received the proposal.

“Consistent with its fiduciary duties, ODP’s board of directors is carefully reviewing the proposal in consultation with its financial and legal advisors to determine the course of action that it believes is in the best interests of the Company and its shareholders. As part of its review, the Board is evaluating various components of the proposal, including potential antitrust and other regulatory challenges given USR Parent’s ownership of Staples and past regulatory decisions blocking the combination of the two companies, purchase price, and closing conditionality,” Office Depot wrote.

Neither Staples nor Office Depot responded to CRN enquiries for further information.

This is at least the second time Staples has publicly made plans to acquire Office Depot. Staples in early 2015 unveiled a plan to acquire Office Depot for about $6.3 billion in cash and stock, but by mid-2016 called off the acquisition after it was blocked by a Federal judge after the U.S. Federal Trade Commission objected to the potentially large reduction in competition in the consumable office supplies market.

In its letter to Office Depot, Staples proposes that Office Depot divest itself of one or both of its business-to-business units as a way to increase the value of Office Depot.

“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.

CompuCom is a large national systems integrator which Office Depot in 2017 acquired for about $1 billion. Office Depot in November reported that its CompuCom Division reported sales of $197 million in the third fiscal quarter of 2020, which was down 22 percent year over year because of the impact of the COVID-19 coronavirus pandemic on product sales and services.

Office Depot’s business-to-business division, called the Business Solutions Division, reported third fiscal quarter sales of $1.2 billion, down 11 percent because of the pandemic. However, that impact was partially offset by a 20-percent increase in sales via its eCommerce channel.

Should those two divisions be divested, Office Depot would primarily consist of its retail office supply business, an area where the company has been closing retail stores.