Office Depot Said to Be in Talks to Sell Rest of Mexico Unit

Office Depot Inc., the second- largest U.S. office-supply chain, is in talks to sell the remaining 50 percent of its Mexican unit to Grupo Gigante SAB, said people familiar with the situation.

Grupo Gigante, which already owns the other half of Office Depot de Mexico, is in discussions with local banks to get financing for the deal, said the people, who asked not to be named because the talks are private. The parties are considering other options and the talks may still fall apart, said one person.

Office Depot is pursuing the sale amid pressure from its top shareholder, Starboard Value LP, to improve earnings. Starboard disclosed a stake in Boca Raton, Florida-based Office Depot last September and said then that the chain should cut general expenses, lower advertising costs and move to smaller stores.

The retailer’s shares climbed as much as 8.2 percent following Bloomberg’s report. They advanced 2 percent to $4.59 at the close in New York.

Office Depot entered the joint venture in 1994, and the business has since expanded to more than 200 stores, according to regulatory filings. The stake in Office Depot de Mexico, which also operates in Colombia and Central America, may be valued at $700 million, the people said.

Photographer: David Paul Morris/Bloomberg

Office Depot is pursuing the sale of the remaining 50 percent of its Mexican unit to Grupo Gigante SAB, amid pressure from its top shareholder, Starboard Value LP, to improve earnings. Close

Office Depot is pursuing the sale of the remaining 50 percent of its Mexican unit to... Read More

Close
Open
Photographer: David Paul Morris/Bloomberg

Office Depot is pursuing the sale of the remaining 50 percent of its Mexican unit to Grupo Gigante SAB, amid pressure from its top shareholder, Starboard Value LP, to improve earnings.

In the year through Sept. 29, the venture generated $860.8 million in revenue, and Office Depot’s share of earnings amounted to about $24 million. Brian Levine, a spokesman for Office Depot, declined to comment on the process. Jorge Hernandez Talamantes, an investor relations official with Gigante, said he didn’t have information about a pending deal with Office Depot and declined to comment further.

Starboard’s Stake

Starboard, based in New York, owned about 14.8 percent of Office Depot as of Dec. 31, according to data compiled by Bloomberg. In October, Office Depot’s board approved a shareholder rights plan that would entitle its investors to additional shares if one entity acquires 15 percent or more of the company’s stock.

The retailer, which has about 1,680 locations worldwide, has posted four straight years of shrinking sales. Office Depot, Staples Inc. and OfficeMax Inc. are facing more competition from online retailers such as Amazon.com Inc. while selling fewer traditional supplies as more workers use computers, tablets and smartphones.

To contact the reporters on this story: Serena Saitto in New York at ssaitto@bloomberg.net; Jonathan J. Levin in Mexico City at jlevin20@bloomberg.net

To contact the editors responsible for this story: Jeffrey McCracken at jmccracken3@bloomberg.net; David Papadopoulos at papadopoulos@bloomberg.net

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.