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Is Staples’ Latest $1 Billion Bid for Office Depot Better Positioned for Success?

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Staples has sent a letter to the Board of Directors of The ODP Corporation offering to acquire its consumer business, including its Office Depot and OfficeMax stores, for $1 billion, or $18.27 per share. The deal also would include officedepot.com and the Office Depot and OfficeMax intellectual property, including all brand names.

Staples has had a long and so far unsuccessful history of trying to merge/acquire its rival Office Depot. A $6.3 billion merger that had been in the works since February 2015 was derailed by a Federal Trade Commission (FTC) ruling in May 2016. The two companies also had attempted a merger in 1997 that was likewise nixed by the FTC.

For this most recent acquisition, Staples filed for the necessary governmental antitrust approvals in November 2020 and the retailer has “made substantial progress responding to the governmental data and document requests issued in connection therewith,” according to its letter. Staples also confirmed that it intends to provide Office Depot “with customary equity and debt financing commitment letters sufficient to provide all required funding for the transaction.”

“We believe our proposal represents a compelling opportunity for the company and its shareholders,” said Staples in the letter. “We look forward to working with the company to negotiate and sign the necessary definitive agreements for the proposed transaction, and to proceed to closing the transaction as soon as practicable.”

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In January 2021, Office Depot rejected a $2.1 billion acquisition offer from Staples on the grounds that it had a “more compelling path forward to create value for ODD.” That path was to split Office Depot into two companies: ODP, which operates the 1,100 retail locations along with the ecommerce business, and NewCo, which inherited Office Depot’s B2B business.

ODP also rejected the offer because “we believe the regulatory risk of pursuing a retail-only transaction to be significantly lower than your proposed transaction,” according to Joseph Vassalluzzo, Chairman of ODP. The combination of a retail-only transaction, along with the reassurances that regulatory progress is being made, could be the combination needed to make this merger to be a success.

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