Office Depot will separate itself into two independent, publicly traded companies, each with its own focused strategy and investment profile. The first, ODP, will operate the 1,100 Office Depot and OfficeMax retail locations along with the retailer’s ecommerce business. The second, NewCo, will inherit Office Depot’s B2B solutions, including its Business Solutions Division contract business, Grand & Toy and the independent regional office supply distribution businesses.
NewCo also will operate the retailer’s B2B digital platform technology business, including BuyerQuest, as well as Office Depot’s global sourcing office and its other sourcing, supply chain and logistics assets. The separation is expected to occur through a distribution of shares of NewCo as a tax-free dividend to ODP’s shareholders in the first half of 2022.
Office Depot highlighted multiple benefits from the separation:
- Each business’ focused strategies will allow for more targeted investment opportunities and growth objectives;
- Both companies will be able to better align with their respective customers’ needs to develop go-to-market strategies and improve innovation;
- The companies can each attract and leverage employees’ development in their specific paths to provide greater career development opportunities; and
- The matching assets and investments of each company will maximize valuation and better align with shareholder return profiles.
“We believe creating two focused, pure-play companies will unlock significant opportunities by improving our ability to meet the needs of our customers, while better matching assets and investment profiles of both companies to generate greater value for our shareholders,” said Gerry Smith, CEO of Office Depot in a statement. “Maximizing the strategic focus and financial flexibility of each entity and aligning their go-to-market strategies and capital investments will enable us to meet customer demand. In addition, positioning their respective growth trajectories and shareholder-specific return profiles will achieve appropriate market valuations. The separation will also provide exciting opportunities for our employees, whose dedication and talent will enable both companies to realize their full potential.”
News of the split coincided with weak results for the company’s Q1 2021 performance. Sales fell 13% to $2.4 billion, and while the retailer reported a 35% year-over-year increase in buy online, pick up in store (BOPIS) purchases, the growth was lower than the increases other retailers have seen.