Office Depot owner declines Staples takeover bid, proposes partial deal

Office Depot parent The ODP Corp. has rejected the $2.12 billion takeover offer of USR Parent Inc., the Sycamore Partners Management LP-affiliated owner of Staples Inc., but said it was open to combining its retail operations with Staples.

"The Board has unanimously concluded that there is a more compelling path forward to create value for ODP and its shareholders than the potential transaction described in your proposal," ODP Chairman Joseph Vassalluzzo said in a letter to Sycamore Partners Managing Director Stefan Kaluzny.

Framingham, Mass.-based USR on Jan. 11 offered to acquire ODP for $40 per share, adding it could raise the price if the company divests its business-to-business unit and its technology services arm CompuCom.

In the letter, Vassalluzzo said it is "readily apparent" from USR's proposal that its sole interest rests in acquiring ODP's retail and consumer-facing e-commerce operations.

He said that ODP has already launched a sale process for its CompuCom business as a result of a strategic review of the unit in November 2020, but that the company intends to keep its commercial segment and move forward with its "Maximize B2B" growth plan.

Vassalluzzo instead proposed a retail-only transaction with USR, either through a joint venture or an acquisition by the Staples owner of ODP's entire retail business. This deal could be carried out with greater certainty and less regulatory risk than the initial proposal, he said.

It would also help maintain competitiveness against nontraditional retailers and optimize ongoing choices for consumers, the chairman added.

Staples had offered to buy ODP in 2015 for about $6.4 billion, but the U.S. Federal Trade Commission blocked the deal on concerns that office supplies prices would rise as a result of the merger.

Vassalluzzo told Kaluzny that ODP has no plan to again engage in a deal "that, as history has shown, would likely result in a prolonged and expensive regulatory review process with no guarantee of success, without a commitment that Staples is willing to bear this risk through a customary 'hell or high water' provision."

He urged USR to review its proposal.

Shares of ODP were down 5.1% in premarket trading Jan. 19 but closed up 0.16% at $45.93.