Five days after Staples made its latest acquisition pitch to ODP Corp. — owner of fellow office supplies B2B distributor and retailer Office Depot — the latter has once again given a rejection.
On Monday, ODP said its board of directors unanimously rejected a proposal from USR Parent, the Sycamore-affiliated owner of Staples to buy certain ODP assets. ODP cited a lack of clarity and specifics from Sycamore in its proposal, stating that Staples did not provide a valuation of the assets it sought to acquire, did not include any obligation or timeline on the part of Sycamore or Staples to proceed with the transaction, agree to a purchase price or assume any related regulatory risk.
Staples' latest offer letter dated March 10 included the following key acquisition assets from ODP:
- The company’s Consumer Business, including but not limited to, the Retail Division (stores), the Direct Division (OfficeDepot.com and direct sales channel) and the related assets;
- All canadian business operations, assets, and real estate owned by the Company (Grand & Toy);
- All of the company’s owned distribution centers located in the U.S., which U.S. based distribution centers will be leased back to the Company;
- The company’s U.S. corporate headquarters, which will be leased back to the Company; and
- The company’s Federation business unit (all of the foregoing described in this paragraph collectively, the “Acquired Assets”).
The March 10 letter didn't include a share price or ODP company valuation, whereas Staples' Jan. 11 offer outlined a $40-per-share proposal valued at $2.1 billion — about 61 percent above ODP's averge share closing price over the previous 90 trading days.
As it did in its letter to Staples dated Jan. 19, ODP said Monday that it is open to combining its retail and consumer-facing e-commerce operations with Staples under the right circumstances and mutually acceptable terms, which could include a joint venture or asset divestment. ODP firmly stated, however, that its B2B businesses would not be part of any such sale or joint venture.
ODP advised USR parent to instruct its financial and legal advisors to have a constructive dialogue regarding the potential combination of ODP's retail and consumer-facing e-commerce operations — one which must include a discussion of valuation and other key proposed terms, as well as the appropriate allocation of regulatory risk.
Staples was set to acquire Office Depot in 2016 for $6.3 billion, but that plan was nixed following the FTC’s December 2015 argument that the combination would take too much of the office supply retail market and a federal judge’s preliminary injunction in May 2016. It was the second time a merger between the two had failed, as the FTC also blocked a deal in 1997.