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"You will either step forward into growth or you will step back into safety."

-Abraham Maslow

January 11,2021

Staples Announces Offer to Buy Office Depot

*Financial Information ($USD)
  • Enterprise Value:         $2.1 Billion
  • EV/LTM Revenue:       0.22x
  • EV/LTM EBITDA:        3.76x
Transaction Update
  • Staples announced today that it sent the board of directors for Office Depot (Nasdaq: ODP) a proposal to acquire “100% of the issued and outstanding common stock,” a transaction that it expected to take at least six months.
  • The transaction values Office Depot at $40.00 per share, a 61% premium over its average closing price during the immediately preceding 90 trading days.
  • Staples also announced in its proposal that the valuation was subject to increase if Office Depot sold its CompuCom and/or its commercial business unit.
martinwolf Analysis
  • Third Time’s the Charm?: This is the third attempt by Staples to acquire Office Depot, with its prior attempts in 1996 and 2015 blocked by federal regulators. Staples is attempting to jump-start the regulatory process, proposing to divest Office Depot’s B2B business to an FTC-approved qualified buyer concurrent with close and filing preliminary HSR notifications. We expect a more favorable regulatory reception for this latest transaction.
  • Honey I Shrunk the Office Depot: This is also the smallest bid of the three — the previous offers were for $4 billion and $6.3 billion. Between increased competition from internet retailers and recent effects of the pandemic, Office Depot has struggled to create value and has focused more recently on reducing costs.
  • When One Door Closes: This proposed transaction potentially creates two new channel opportunities if both Office Depot’s CompuCom and B2B businesses are divested. Expect many people in the channel to look closely at those assets — and expect more channel M&A concurrent with/closely following a Staples/Office Depot transaction
  • End of an Era: Office Depot subsidiary CompuCom, acquired in 2017 for $1 billion as a means to jumpstart its business services unit, was arguably the best solution provider around under formative CEO Jim Dixon. But it lost its way after the last time Dixon left the business, and under Office Depot it has been making slow progress.
For more information about this transaction, click here to read the letter from Staples and click here to read the acknowledgement by Office Depot.
*Financial information from the press release/Factset
martinwolf was not the advisor in this transaction.
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