The ODP Corporation Responds to Proposal by Sycamore Partners, Owner of Staples, to Sign a Letter of Intent to Sell Various ODP Assets to Staples for an Unspecified Price
Proposal Contemplates Acquisition of B2B Assets That Are Part of ODP’s Continuing B2B Growth Strategy
Proposal Lacks Basic Material Terms, Including Purchase Price, and Any Commitment by Staples to Complete the Proposed Transaction
ODP Again Urges Sycamore to Pursue Alternative of Combining ODP and Staples Retail Businesses
Staples’ proposal was contained in a letter dated
The ODP Board carefully reviewed the letter and the LOI in consultation with its financial and legal advisors, and determined that ODP, in the best interest of its shareholders, cannot agree to the proposal. The Board noted in its response that Staples did not provide a valuation of the assets that Staples sought to acquire, which include certain B2B businesses of ODP. The Board further noted that the LOI, which contemplated a binding commitment to seek regulatory approval, also did not include any obligation on the part of Sycamore or Staples to proceed with the transaction, agree to a purchase price, or assume any related regulatory risk.
ODP reiterated that, as it has previously stated -- including in its letter to Staples dated
The full content of the ODP Board’s letter dated
ODP Board Letter, dated
The Board of Directors of
The Board has carefully reviewed the
To summarize the terms of your proposal, the LOI provides that:
ODP would sell to Staples at an unspecified price its retail and consumer-facing ecommerce operations, its B2B-related assets of Grand & Toy (its Canadian subsidiary which has no retail stores), the Federation companies (which have no retail stores), and all
U.S.distribution centers, as well as ODP’s global corporate headquarters;
ODP would be obligated to submit the letter of intent to the
U.S. Federal Trade Commissionand the Canadian Competition Bureauas a basis for continuing the burdensome and expensive regulatory reviews initiated at Staples’ request, and would be obligated for an indefinite period of time to use its efforts to obtain regulatory approval for this proposed transaction;
- ODP would be obligated to announce this proposed transaction, which contains no agreement on the purchase price for our assets or on any of the terms and conditions of the transition services agreement, intellectual property license agreement, or sales/leaseback agreements that you would require according to your LOI; and
- Staples would not be subject to any commitment with respect to a proposed purchase price or any other terms of this proposed transaction, but instead you would “expect to negotiate the purchase price” at a later time.
As is evident in this summary, you are proposing no valuation of the assets you wish to acquire, no timeframe for completing a transaction and no obligation on Sycamore or Staples to proceed with the transaction, agree to a purchase price, or take on any of the regulatory risk.
As ODP has previously stated, including in our letter to you dated
With respect to Grand & Toy specifically, as you are aware, the
Following receipt of your
In the meantime, we will continue to focus on building our B2B strategy and other growth initiatives.
Chairman of the Board of Directors of
Staples’ Letter, dated
Board of Directors
Ladies and Gentlemen:
The attached LOI describes in detail the assets that Staples proposes to acquire from the Company, and we are prepared to immediately sign the LOI and pivot towards the Proposed Transaction described therein. We believe that moving forward on this basis offers the following benefits: (1) the simplified Proposed Transaction, whereby the Company would retain its core
We would expect to negotiate the purchase price for the Acquired Assets once the parties make further progress to advance the requisite competition clearances for the Proposed Transaction with the
Please contact me with any questions regarding our proposal.
NON-BINDING LETTER OF INTENT
This non-binding Letter of Intent (“LOI”) outlines the principal terms and conditions of a proposed transaction between
Upon the consummation of the proposed transaction (the "Proposed Transaction"), Staples will acquire from the Company:
1. the Company’s Consumer Business, including but not limited to, the Retail Division (stores), the Direct Division (OfficeDepot.com and direct sales channel) and the related assets;
2. all Canadian business operations, assets, and real estate owned by the Company (Grand & Toy);
3. all of the Company’s owned distribution centers located in the
4. the Company’s
5. the Company’s Federation business unit (all of the foregoing described in this paragraph collectively, the “Acquired Assets”).
In connection with the Proposed Transaction, in addition to a purchase and sale agreement with respect to the Acquired Assets, Staples and the Company will enter into certain other agreements to be mutually agreed to by the parties, including, but not limited to, a mutually satisfactory transition services agreement, intellectual property license agreement, and leases for the sale leaseback real estate.
For the avoidance of doubt, except to the extent expressly provided above, the Company will retain ownership of its
The parties expect to negotiate the purchase price for the Acquired Assets once the parties make further progress to advance the requisite competition clearances for the Proposed Transaction with the
Submission of LOI to Competition Authorities
Promptly following the execution and delivery of this LOI, the parties will submit a copy of this LOI to the
Promptly following the execution and delivery of this LOI, the parties will make a mutually agreed upon public announcement regarding the transactions contemplated hereby, and Staples will confirm its intention not to pursue its previous plans to make a tender offer for the Company’s outstanding shares of common stock.
Except for the paragraphs entitled “Submission of LOI to Competition Authorities” and “Public Announcement” (which paragraphs will be binding on the parties), this LOI does not constitute a binding agreement and is intended to serve only as a basis for discussion of the major prospective business terms that would apply to the transactions contemplated hereby. Detailed terms that would be incorporated in the definitive transaction documents, if any, will need to be agreed upon during the negotiations between parties prior to forming any binding and enforceable contract, and no party will have any legally binding obligation to the others unless and until such definitive transaction agreements are executed (other than with respect to the paragraphs entitled “Submission of LOI to Competition Authorities” and “Public Announcement”, which paragraphs will be binding on the parties).
ACKNOWLEDGED AND AGREED TO AS OF THE DATE WRITTEN BELOW:
FORWARD LOOKING STATEMENTS
This communication may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements or disclosures may discuss goals, intentions and expectations as to future trends, plans, events, results of operations, cash flow or financial condition, the potential impacts on our business due to the unknown severity and duration of the COVID-19 outbreak, or state other information relating to, among other things, the Company, based on current beliefs and assumptions made by, and information currently available to, management. Forward-looking statements generally will be accompanied by words such as “anticipate,” “believe,” “plan,” “could,” “estimate,” “expect,” “forecast,” “guidance,” “outlook,” “intend,” “may,” “possible,” “potential,” “predict,” “project,” “propose” or other similar words, phrases or expressions, or other variations of such words. These forward-looking statements are subject to various risks and uncertainties, many of which are outside of the Company’s control. There can be no assurances that the Company will realize these expectations or that these beliefs will prove correct, and therefore investors and stakeholders should not place undue reliance on such statements.
Factors that could cause actual results to differ materially from those in the forward-looking statements include, among other things, highly competitive office products market and failure to differentiate the Company from other office supply resellers or respond to decline in general office supplies sales or to shifting consumer demands; competitive pressures on the Company’s sales and pricing; the adverse effects of an unsolicited tender offer on our business, operating results or financial condition; the risk that the Company is unable to transform the business into a service-driven, B2B platform that such a strategy will not result in the benefits anticipated; the risk that the Company may not be able to realize the anticipated benefits of acquisitions due to unforeseen liabilities, future capital expenditures, expenses, indebtedness and the unanticipated loss of key customers or the inability to achieve expected revenues, synergies, cost savings or financial performance; the risk that the Company is unable to successfully maintain a relevant omni-channel experience for its customers; the risk that the Company is unable to execute both the Business Acceleration Program and the Maximize B2B Restructuring Plan successfully or that such program and plan will not result in the benefits anticipated; the risk that the Company will not be successful in maximizing the full potential of its CompuCom Division; failure to effectively manage the Company’s real estate portfolio; loss of business with government entities, purchasing consortiums, and sole- or limited- source distribution arrangements; failure to attract and retain qualified personnel, including employees in stores, service centers, distribution centers, field and corporate offices and executive management, and the inability to keep supply of skills and resources in balance with customer demand; failure to execute effective advertising efforts and maintain the Company’s reputation and brand at a high level; disruptions in computer systems, including delivery of technology services; breach of information technology systems affecting reputation, business partner and customer relationships and operations and resulting in high costs; unanticipated downturns in business relationships with customers or terms with the suppliers, third-party vendors and business partners; disruption of global sourcing activities, evolving foreign trade policy (including tariffs imposed on certain foreign made goods); exclusive
Jeremy.Fielding@kekstcnc.com / Ruth.Pachman@kekstcnc.com