Office Depot Sends Letter to Shareholders Urging Them to Vote the White Card
to Ensure That the Company Remains on Course to Unlock Significant Value
Details Significant Progress Made on Proposed Merger and Integration with
Says Starboard Nominees and Proposal Pose Risk to Merger
BOCA RATON, Fla. -- August 7, 2013
Office Depot, Inc. (NYSE: ODP), a leading global provider of office supplies
and services, today sent a letter to all shareholders urging them to vote the
white proxy card in favor of Office Depot’s ten director nominees and their
ongoing efforts to successfully close the OfficeMax transaction and unlock
significant value for all shareholders.
In the letter, Office Depot also highlights why it believes activist investor
Starboard Value LP (Starboard) and its nominees could significantly disrupt
not only the progress and momentum made on the OfficeMax transaction (as
integration planning and a CEO search are already well underway), but also the
realization of substantial synergies from the planned merger.
Starboard’s purported plan for the Company, which they unveiled just a few
weeks ahead of the annual meeting, also threatens Office Depot’s core
operational improvements by pushing the Company to make outsized cuts in
critical business functions.
A copy of the letter follows:
August 7, 2013
Dear Fellow Shareholder:
Our annual meeting of shareholders on August 21, 2013 is now just two weeks
away and we are writing to you today to underscore that your vote at this
meeting will determine the future value of your investment in Office Depot. We
are urging all shareholders to vote the WHITE proxy card today in support of
our nominees for Office Depot’s Board of Directors, who are best positioned to
guide the Company through its value-creation opportunities. Over the course of
the last week, your vote FOR our nominees has become even more critical.
Vote on the WHITE Proxy Card to Ensure that Your Company
Remains on Course to Unlock Significant Value
We urge you to disregard any proxy materials from Starboard Value, LP, an
activist investor in the Company’s stock which is threatening to throw the
Company’s recent progress off track. Your Board strongly believes that at this
time the insertion of Starboard’s nominees into the preparation process around
the Company’s planned merger with OfficeMax would imperil the continued,
successful implementation of our strategic plan and integration.
Our ongoing integration work is critical to delivering the significant value
inherent in our merger and is being led by joint teams from both Office Depot
and OfficeMax with the added guidance of The Boston Consulting Group (BCG).
BCG has advised that each month of delay in the integration process will
result in the loss of $12M in synergy savings for shareholders. Moreover, any
synergies unrealized in the first 18 months are unlikely to be realized at
all. We urge you to let the Board and management continue to focus on creating
value for you -- please vote on the WHITE proxy card today.
Preparation for the Merger is Already Well Underway
This is a critical moment in your Company's history, and one that is years in
the making. The OfficeMax merger is a pivotal step in the strategic plan put
in place by this Board in 2010, and it is a step we have been intensely
focused on ever since.
Since integration planning began in May, the Board and management teams from
Office Depot and OfficeMax have already:
*Hired BCG as an external integration advisor, after interviewing five
top-tier integration firms, and they are already actively engaged in the
*Established an Integration Management Office (IMO) and 17 teams – 12
integration planning teams and five platform teams with joint
representation from Office Depot and OfficeMax.
*This includes an informal customer experience team – a cross
functional working group that cuts across the Company’s three sales
channels as well as Marketing, Merchandising, IT and Finance.
*Participated in a two-day Integration Leadership Summit with more than 90
executives, Board members and advisors to work through risks and
We can’t emphasize enough how critically important Day 1 and Year 1 are in our
planning efforts for transitioning customers, maintaining market share and
retaining our many talented employees all in an increasingly competitive
market environment. We only have one shot to get all of this right. That’s why
your Board and management have spent so much time on Day 1 and Year 1
integration strategy and an operating plan that includes:
*Identifying priorities and creating specific action item planning for the
combined Company across all areas of functionality.
*Performing a detailed risk assessment of business continuity for Day 1 and
synergy realization for Year 1.
*Establishing Day 1 and Year 1 technology requirements in close
coordination with the IT teams from both companies.
*Building a strategy for indirect goods and services to drive significant
Year 1 synergies.
We strongly believe that any change in the Board composition at this late
stage in integration planning will put in jeopardy our Day 1 readiness plan
and our ability to provide a seamless Day 1 transition for customers and
Do Not Let Starboard Disrupt the Vital CEO Search Process
Another critical step in our integration planning process, already well
underway, is the search for a new CEO for the combined Company. Progress to
*Hiring executive search firm Korn/Ferry International to conduct an
exhaustive search process with over 100 candidates currently under
consideration and active interviewing taking place.
*Identifying criteria to guide the CEO search process:
*Ideally a public company CEO with Wall Street credibility and a
global perspective; strong executive from Fortune 100 organization
could also be considered.
*High integrity, team building, transformational leader with a proven
*Experienced business integrator who has achieved synergy and value
You should be aware that two of the Company directors targeted by Starboard
sit on the important CEO search committee, which is comprised of three
directors each from Office Depot and OfficeMax. It is imperative that this
committee continues its progress in attracting, evaluating and ultimately
identifying a world-class CEO. If members of the committee are replaced by
Starboard’s nominees – who are new to the CEO search, Office Depot and to our
merger partner – the search process may be completely upended. The newly
configured committee would need to start over in building working
relationships among its members, reaching consensus on desired CEO qualities
and determining which strategic goals should be communicated to possible
candidates. We expect that candidates who are already far along in the
selection process may be reluctant to continue.
Keep the Merger Integration Initiatives on Course
It was only last Friday that Starboard even disclosed a “plan” for your
company – a plan that is fraught with errors and astonishingly naïve in its
assumptions. Starboard can’t even get the basic numbers right:
*Starboard suggests that $215 million of G&A reductions can be achieved.
However, Starboard's baseline figures are in error and this sort of
reduction would require IT and Finance costs be reduced by close to 60%,
potentially crippling the Company's daily operations.
*Starboard suggests more can be done to rationalize Supply Chain
operations. The Company has transformed its network footprint (from 33
facilities to the current 15) to a structure we feel is best in class in
*Starboard's assessment of the Company's distribution costs does not
recognize customer demands unique to the office products space, and has
used "back of the envelope" math with highly flawed (if not irrelevant)
benchmarking to suggest a $122 million cost savings opportunity that
simply does not exist.
*Starboard has falsely "identified" $317 million of EBIT opportunities tied
to "service and category extension" opportunities that include a poorly
constructed and simplistic view on developing service sales and new
*Starboard’s plan gives little, if any, attention to the capital and
operating expense that would be required to launch some of the ideas they
have framed so very loosely -- particularly the $476 million of "growth"
*Tellingly, Starboard’s 100-day work plan shows “Merger Planning” as just
one line-item out of 11 different initiatives -- an allocation of
objectives that demonstrates little understanding of the Company-wide
effort and focus required to make a merger of equals happen in the real
These are just a few examples of why we are extremely concerned that electing
Starboard’s nominees would significantly set back the business and destroy
much of the value inherent in the merger.
Starboard’s Proposal Poses Massive Risk to the OfficeMax Merger:
Vote the WHITE Card Today to Support Your Board’s Continued Momentum
Your vote is important in this election, and we urge you to vote TODAY so that
your voice is heard. To elect our nominees for Office Depot’s Board of
Directors, please vote by telephone, by Internet, or by signing and dating the
enclosed WHITE proxy card and returning it in the postage-paid envelope
Allow your board and management team to do what is in the best interests of
all shareholders – unlock real value by executing on our strategic plan for
operational improvement, closing the OfficeMax transaction, making progress on
our CEO search, and continuing our integration planning efforts.
Vote the WHITE card today.
Thank you for your support.
W. Scott Hedrick Neil R. Austrian
Lead Director Chairman and Chief Executive Officer
Your Vote Is Important, No Matter How Many Or How Few Shares You Own
If you have questions about how to vote your shares, or need additional
please contact the firm assisting us in the solicitation of proxies:
INNISFREE M&A INCORPORATED
Shareholders Call Toll-Free: (877) 825-8621
Banks and Brokers Call Collect: (212) 750-5833
We urge you NOT to vote using any Gold proxy card sent to you by Starboard,
as doing so will revoke your vote on the WHITE proxy card.
Office Depot urges all shareholders to vote the WHITE proxy card for its ten
Board nominees to allow the Board to continue to execute on these important
initiatives and complete the integration planning necessary to deliver value
for all shareholders. Shareholders who need assistance in voting or who have
questions about the annual meeting may call the Company’s proxy solicitor
toll-free at (877) 825-8621.
About Office Depot
Office Depot provides core office supplies, the latest technology, school
essentials, copy & print services, cleaning & breakroom products, and
furniture to consumers, teachers and businesses of all sizes through 1,614
worldwideretail stores,global e-commerce operations, a dedicated sales
force, an inside sales organization, and top-rated catalogs. The Company has
annual sales of approximately $10.7 billion, employs about 38,000 associates,
and serves customers in 60 countries around the world.
Office Depot’s common stock is listed on the New York Stock Exchange under the
symbol ODP. Additional press information can be found
IMPORTANT INFORMATION HAS BEEN AND WILL BE FILED WITH THE SEC
In connection with the solicitation of proxies for Office Depot’s Annual
Meeting of Shareholders (the “2013 Annual Meeting”), Office Depot has filed
with the Securities and Exchange Commission (the “SEC”) a definitive proxy
statement concerning the proposals to be presented at the 2013 Annual Meeting.
The proxy statement contains important information about Office Depot and the
2013 Annual Meeting. Office Depot and its directors, executive officers and
certain employees may be deemed to be participants in the solicitation of
proxies from Office Depot’s shareholders in connection with the election of
directors and other matters to be proposed at the 2013 Annual Meeting.
Information regarding the interests, if any, of these directors, executive
officers and specified employees is included in the definitive proxy statement
and other proxy materials (the “Proxy Materials”) filed by Office Depot with
the SEC on July 19, 2013. On July 22, 2013, Office Depot mailed the Proxy
Materials to shareholders of record as of July 11, 2013. Investors and
shareholders are able to obtain free copies of the Proxy Materials and other
documents filed with the SEC by Office Depot through the website maintained by
the SEC at www.sec.gov. In addition, investors and shareholders are able to
obtain free copies of the Proxy Materials and other documents filed by Office
Depot with the SEC by contacting Office Depot Investor Relations at 6600 North
Military Trail, Boca Raton, FL 33496, or by calling 561-438-7878.
OFFICE DEPOT SAFE HARBOR STATEMENT
This communication may contain forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995 concerning Office
Depot, the merger and other transactions contemplated by the merger agreement,
and the outcome of the 2013 Annual Meeting. These statements or disclosures
may discuss goals, intentions and expectations as to future trends, plans,
events, results of operations or financial condition, or state other
information relating to Office Depot, based on current beliefs of management
as well as 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,” “intend,” “may,” “possible,” “potential,” “predict,”
“project” or other similar words, phrases or expressions. These
forward-looking statements are subject to various risks and uncertainties,
many of which are outside of Office Depot’s control. Therefore, investors and
shareholders 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 adverse regulatory decisions; failure to
satisfy other closing conditions with respect to the merger; the risks that
the new businesses will not be integrated successfully or that Office Depot
will not realize estimated cost savings and synergies; Office Depot’s ability
to maintain its current long-term credit rating; unanticipated changes in the
markets for its business segments; unanticipated downturns in business
relationships with customers or their purchases from Office Depot; competitive
pressures on Office Depot’s sales and pricing; increases in the cost of
material, energy and other production costs, or unexpected costs that cannot
be recouped in product pricing; the introduction of competing technologies;
unexpected technical or marketing difficulties; unexpected claims, charges,
litigation or dispute resolutions; new laws and governmental regulations. The
foregoing list of factors is not exhaustive. Investors and shareholders should
carefully consider the foregoing factors and the other risks and uncertainties
that affect Office Depot’s business described in its Annual Report on Form
10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other
documents filed from time to time with the SEC. Office Depot does not assume
any obligation to update these forward-looking statements.
Office Depot, Inc.
Richard Leland, 561-438-3796
Brian Levine, 561-438-2895
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