What A Merger Deal Between Staples And Office Depot Would Mean

Staples is once again looking to buy Office Depot (ODP) in a deal that is estimated to be valued at $2.1 billion in what would create one of the largest office supply chain retailers.

Staples made a previous attempt at purchasing Office Depot five years ago. In 2016, the $6.3 billion deal was called off due to antitrust concerns. Staples said in this go-around, it is ready to divest any of Office Depot’s commercial businesses that would help it gain regulatory approval from the Federal Trade Commission.

Operating under the corporate moniker USR Parent Inc., Staples sent a letter to Office Depot’s parent company ODP Corp. with its offer to purchase the chain. In the letter, it laid out its proposal, which included a plan for purchase at $40 per share in cash, which was 8.2% above Office Depot’s close price on Friday, Bloomberg reported.

Staples said the purchase price represents a 61% premium over the company’s average closing price over the last 90 days. Upon news of the deal, Office Depot’s shares were up over 16% as of mid-day Monday.

Staples also said in its letter that it would consider increasing its proposed valuation if Office Depot divested certain business units, such as its CompuCom division or its U.S. business-to-business unit.

A merger of the two office chains would bring together the two largest retailers in the office supply industry as brick-and-mortar stores struggle to stay afloat amid the coronavirus pandemic, Bloomberg said.

Store closures and bankruptcy filings have plagued numerous retailers amid the pandemic. In May, Office Depot announced that it was closing or consolidating an undisclosed number of stores and distribution centers by 2023. This was in addition to reducing its workforce by about 13,000.

Staples, which is owned by investment firm Sycamore Partners, said it has sufficient resources to finance the purchase. If Office Depot does not agree to the deal, Staples said it will commence a tender offer in March as certain company entities already own about 4.9% of Office Depot’s common stock.

Shares of Office Depot were trading at $43.06 as of 12:41 p.m. EST, up $6.10 or 16.50%.