Investor Demands Staples, Office Depot Begin Courting, Hoping To Hear Wedding Bells Soon

There’s a fine line between offering helpful suggestions and aggressively pushing for someone to do what you want. When it comes to activist investors Starboard Value, they tend to fall squarely in the latter camp – who can forget their harsh words for Olive Garden and ruthless take over of its board of directors? The firm appears to be back at it by not-so-nicely suggesting that Staples get a move on with regard to a possible merger with Office Depot.

Bloomberg reports that Starboard Value, the company that roundly mocked Olive Garden and then seized seats on its board of directors just a few short months ago, is now publicly pushing for a union between rivals Staples and Office Depot.

The investment firm, which has a stake in both companies, increased the pressure for a merger by sending a letter to Staples CEO Ronald Sargent demanding that the company engage advisers to begin work on a deal.

“The best way to maximize value for Staples’ shareholders is through exploring and completing a business combination with Office Depot,” Starboard CEO Jeffrey C. Smith said in the letter. “We believe that now is the right time to pursue such a transaction, and we urge you to immediately retain a reputable investment bank and legal advisers to assist the board in evaluating, structuring and executing a transaction.”

According to Starboard, a merger between the two companies could deliver more than $2 billion in cost savings and help the retailers better compete with larger chains and online companies.

Also in the letter, Starboard criticized Staples for delaying a shareholder-supported measure to separate the chairman and CEO roles.

For its part, Staples responded to the pushy investor letter by saying it would take the suggestions under consideration.

“The company made clear that the Staples’ board of directors carefully considers all actions that would create shareholder value and is committed to taking actions that are in the best interests of all of the company’s shareholders,” officials with the company said in a statement. “The company welcomes continued, constructive dialog with shareholders focused on enhancing the value of Staples.”

Rumblings of a possible merger between Office Depot and Staples began in mid-December.

At that time, Starboard had recently taken a 5.1% stake in Staples and increased its existing holding in Office Depot by about 10%.

A pending deal between the two companies could be valued at more than $6 billion, analysts told Reuters at the time.

Starboard Ratchets Up Its Demands for Staples Merger [Bloomberg]

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