Staples boss Stefan Kaluzny hopes he finally has a winning bid to roll up the country’s three big office-supply chains into one, with a $1 billion offer to buy the Office Depot and OfficeMax retail operations.
Kaluzny, who runs Staples owner Sycamore Partners, submitted the bid to the board of directors of Office Depot and OfficeMax parent ODP Corp. on Friday. Framingham-based Staples, the biggest office supply chain, had proposed a $2.1 billion offer for the entire ODP business in January. But Kaluzny was rebuffed by Office Depot management, in part because of antitrust concerns over combining the business-supply operations of both companies.
By focusing on just the retail side of Boca Raton, Fla.-based ODP, which represents just under half of the company as measured by revenue, Kaluzny aims to offer reassurances that the combination will not run into significant regulatory issues.
Executives at both companies know all about the risks associated with obtaining antitrust approval: Staples had inked a $6.3 billion deal to acquire all of Office Depot in 2015, only to watch it evaporate the next year in federal court after the Federal Trade Commission challenged it. Regulators at the time said it would put too much clout under one corporate roof in the market for large business-to-business customers. (A proposed marriage between the two companies in 1996 also failed because of antitrust scrutiny.) Staples unsuccessfully argued in 2016 that Amazon’s then-nascent office supply business could pose a serious competitive threat, although its argument was spot-on in that regard: Amazon’s business-to-business division grew to be the size of ODP within the next two years.
The loss was consequential for Staples: It eventually led to the retirement of then-chief executive Ron Sargent and the sale in 2017 of the company to Sycamore, a New York-based private equity firm that specializes in beaten-down retail operations.
But Kaluzny clearly remains a believer in the vision that Sargent had for combining the 1,000-plus Staples stores with the shops under the Office Depot corporate umbrella (a group that now has about 1,100 locations, including OfficeMax stores). Kaluzny’s bid on Friday also would include the e-commerce business at officedepot.com.
Kaluzny’s latest maneuver follows a decision by ODP leadership to split the company in two, spinning out the business-to-business operations and retaining the retail side. Kaluzny said he is essentially seeking to buy what would be the remaining business lines after the spinoff. The ODP retail sales division reported $4.2 billion in revenue in 2020, or 43 percent of the company’s total revenue. That reflected a decline of 4 percent in the retail business from 2019, largely because of planned store closures and reduced customer traffic at remaining locations. Because Staples is now privately owned, it no longer discloses its revenue.
It’s unclear how ODP management will respond to this offer, as all the company would say on Friday is that it is carefully reviewing the Staples proposal to determine the best course of action for ODP and its shareholders. However, its investors appeared pleased by the turn of events: Shares in the company were up 11 percent on Friday, to close at $49.56.