An worker works inside an Workplace Depot Inc.Susana Gonzalez | Bloomberg | Getty PhotosFirm: ODP Corp. (ODP)ODP Corp. is a supplier of enterprise
An worker works inside an Workplace Depot Inc.
Susana Gonzalez | Bloomberg | Getty Photos
Firm: ODP Corp. (ODP)
ODP Corp. is a supplier of enterprise providers, merchandise and digital office know-how options to small and medium companies. The corporate has a totally built-in business-to-business distribution platform of roughly 1,300 shops and on-line presence. The corporate, previously Workplace Depot, has three totally different segments: the Enterprise Options Division (the most important element of the built-in B2B platform), the Retail Division and the CompuCom Division, which ODP acquired in 2017 for $1 billion. It operates below the manufacturers Workplace Depot, OfficeMax, CompuCom and Grand & Toy.
Inventory Market Worth: $2.2 billion ($42.69 per share)
Activist: HG Vora
Proportion Possession: 9.49%
Common Price: $21.00
Activist Commentary: HG Vora will not be an activist investor, however has proven to be energetic worth traders when mandatory. It’s an occasion pushed, value-oriented fund that was based in 2009 by Parag Vora. HG Vora is a part of a brand new breed of activism – deep worth traders who’ve expertise being activist when mandatory, however don’t use it as their prime technique. Activists like this are sometimes much less threatening and well-respected amongst boards and institutional traders.
What’s taking place:
On Jan. 25, 2021, HG Vora and the corporate entered right into a Cooperation Settlement, pursuant to which the corporate elevated the dimensions of the board to 10 administrators and appointed Marcus B. Dunlop, a Accomplice at HG Vora, to the board as a director with a time period expiring on the 2021 Annual Assembly. HG Vora agreed to abide by sure customary voting and standstill provisions.
Behind the scenes:
Staples has been attempting to amass ODP for six years, however its 2016 supply of $6.three billion didn’t get regulatory approvals. Since then, Staples was acquired by Sycamore Companions, who made a suggestion on Jan.11, 2020 to amass ODP for $40 per share in money. Sycamore’s plan was to purchase ODP and promote the Enterprise Options and the CompuCom Divisions and solely preserve Retail.
On Jan. 19, 2021, ODP issued a letter stating that the board unanimously concluded that there’s a extra compelling path ahead for the corporate than the potential transaction outlined within the acquisition proposal. The corporate will probably be pursuing its technique of constructing out its B2B technique and different development initiatives and persevering with its course of for the sale of CompuCom. The corporate did, nevertheless, state that it was open to combining the retail and consumer-facing e-commerce operations with Staples below mutually-acceptable phrases.
The corporate didn’t outright reject Staples’ proposal, however quite prompt a three way partnership that may maximize synergies and efficiencies whereas lowering the regulatory threat of pursuing a retail-only transaction.
Within the midst of all of this, a consultant of HG Vora added to the board. It is a vital time for the corporate, and the board must be recommended for including a shareholder consultant to the board to help on this vital evaluation and determination.
HG Vora’s SEC filings point out that it was a passive investor till Jan. 19, when presumably it began speaking to the corporate about becoming a member of the board. The truth that a settlement was reached on Jan. 25 reveals that this was very amicable and never solely one thing HG Vora needed, but in addition one thing the corporate felt was vital.
Having an institutional shareholder consultant on a board at a time like that is like having free entry to an funding financial institution that doesn’t care about charges, solely shareholder worth. HG Vora’s consultant goes to have the ability to take any of ODP’s potential strategic alternatives again to HG Vora the place they’ll mannequin all the things out and assist the board determine the perfect strategic choice to create shareholder worth.
HG Vora clearly sees additional worth from right here or else they’d have walked away from this funding with a 126% return in lower than six months. Taking a board seat at this cut-off date reveals not solely that they’re assured that there’s extra worth, however that they’re long run traders who give attention to shareholder worth.
Lastly, it is very important observe that Starboard had an activist marketing campaign at Workplace Depot in 2012 and two of the administrators (Joseph S. Vassalluzzo and Cynthia A. Jamison) that Starboard placed on the board are nonetheless on the board, with Vassalluzzo serving because the non-executive chairman of the board.
Ken Squire is the founder and president of 13D Monitor, an institutional analysis service on shareholder activism, and the founder and portfolio supervisor of the 13D Activist Fund, a mutual fund that invests in a portfolio of activist 13D investments.