Office Depot turned down an unsolicited takeover offer from Staples, but said it was open to an alternative deal, the latest turn in a long-standing dance between office supply retailers.
Staples proposed January 11 to buy Office Depot’s parent company, ODP Corp., for more than $ 2 billion or $ 40 a share. Staples said it would make a public offer for ODP’s shares in March if the companies fail to agree on a deal.
ODP has concluded that a sale of its retail and consumer-facing e-commerce businesses to Staples or a joint venture is preferable to a full acquisition, said a letter from the ODP chairman to an official of the controlling private equity firm about Staples. It said in the letter, seen by The Wall Street Journal, that such a deal would provide the same cost savings as a full sale of the company, but is less likely to result in long-term regulatory oversight.
Staples’ recent bid marks the third time it has attempted to acquire its main physical rival. Previous efforts, including a $ 6.3 billion proposal five years ago, have been blocked by antitrust enforcement officials. Staples was taken privately by Sycamore Partners in 2017 and is now controlled by a subsidiary of the buyout firm called USR Parent Inc.
In a sign that investors are expecting some kind of deal, ODP shares are up 24% since the USR announced its offer and closed at $ 45.86 on Friday. Merging the retail business of the office suppliers could deliver significant cost savings if the combined company reduces its footprint by closing overlapping stores.