Office Depot Plans to Split into Two Companies

Office Depot Corporation (ODP) announced today that it will split into two independent, publicly traded companies. The two companies will consist of:

• Office Depot, which will function as a provider of retail consumer and small business products and services distributed via approximately 1,100 Office Depot and OfficeMax retail locations and online;

• “NewCo” – a B2B solutions provider (Office Depot Business Solutions Division contract business, Grand & Toy and Office Depot’s independent regional office supply distribution businesses) serving small, mid-size and enterprise-level companies. NewCo will also own the company’s newly formed B2B digital platform technology business, including BuyerQuest, as well as the company’s global sourcing office and its other sourcing, supply chain, and logistics assets.

Competitor Staples had recently attempted to acquire Office Depot, but Office Depot rejected its offer. Since Staples had said it wasn’t interested in Office Depot’s B2B business, the split of Office Depot could open the door to further negotiations between the two companies.

Office Depot expects to split in the first half of 2022, pending regulatory and final board approval.

The split will involve a distribution of shares of NewCo as a tax-free dividend to Office Depot’s shareholders. Afterwards, Office Depot shareholders will own 100 percent of both companies.

Additionally, while Office Depot and NewCo will be separate, independent public companies, they will continue to share commercial agreements that will allow them to continue to leverage scale benefits in such areas as product sourcing and supply chain.

Benefits of the Split

Office Depot’s board said it believes the split will allow Office Depot and NewCo to pursue market opportunities and accelerate growth. Office Depot expects key benefits of the separation to include:

• Allow Office Depot and NewCo to pursue specific strategies with more targeted investment opportunities and growth objectives;

• Better focusing on customers’ needs;

• Attract talent and leverage employees’ expertise; and

• Match assets and investments to maximize valuation.

CEO Comments

Office Depot CEO Gerry Smith commented: “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.

“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.”

Smith continued, “We are fortunate to be undertaking this process from a position of financial, operational, and organizational readiness, with significant liquidity, providing us flexibility in determining how to allocate capital between the separated entities. We are in a position of strength, having recently streamlined our retail operations for cost efficiencies, while adding net new customers for future growth in our BSD contract division and developing a new digital platform business, including the acquisition of BuyerQuest. With the flexibility created by our holding company reorganization last year, and after careful deliberation, we are now ready to take this exciting next step in our evolution.”

More Resources

• March 2021: Office Depot Turns Down Staples’ Acquisition Offer Again
• January 2021: Office Depot Rejects Staples’ Buyout Offer, Proposes Alternatives