Office-supply company Staples has offered to buy Office Depot for $40 per share in cash.
In a letter to the board of directors of Office Depot’s parent company, ODP Corp., Staples’ parent company, USR Parent, proposed acquiring 100% of the outstanding common stock of ODP in an all-cash transaction.
USR said the offer price represented a 61% premium over ODP’s average closing price during the immediately preceding 90 trading days.
“Staples believes that its all-cash transaction is a compelling value proposition for ODP’s stockholders that offers a high degree of certainty and is superior to the intrinsic, standalone value of ODP,” the letter said.
This is the third time Staples has tried to acquire Office Depot. The Federal Trade Commission (FTC) rejected previous merger attempts between the two office-supply companies in 1997 and 2015.
Staples was taken private by private equity company Sycamore Partners in a $6.9 billion acquisition in 2017.
In its letter, Staples said it was prepared to take “all necessary measures” to win regulatory approval, including selling ODP’s business-to-business unit to an FTC-qualified buyer concurrent with the closing of the deal. It also said it could sell the IT business CompuCom, and that strategic divestments could increase the value of the deal.
“We may increase our proposed valuation (i) for logical strategic divestitures that ODP may execute to unlock value, such as the sale of its CompuCom business and/or (ii) if ODP conducts a comprehensive sale process for its U.S. commercial business unit (the “B2B Business”),” Staples said.
The regulatory approval process is expected to take at least six months.
In 2015, Staples announced a bid to buy Office Depot in a deal valued at $6.3 billion, citing cost savings of about $1 billion per year. In 2014, it said it would close about 12% of its stores in North America. The company has seen intensifying competition from Amazon and Walmart since.
Shares of Office Depot jumped 10% premarket ahead of the news and were up 16% in midmorning trading Monday. Shares were at about $37 at Friday’s close.