Office Depot Holder Starboard Urges Unit Sale to Gigante

Starboard Value LP, the activist investor that has pressured Office Depot Inc. (ODP) to improve operations, urged the second-largest office-supply chain to sell its Mexico unit to Grupo Gigante SAB.

Gigante, the Mexico City-based retailer that owns the other 50 percent of Office Depot de Mexico, offered to pay 8.78 billion pesos ($683 million) for the rest of the company, according to a Feb. 21 filing. Office Depot agreed to buy OfficeMax Inc. (OMX) for $1.17 billion the day before Gigante’s offer was made public. As part of the merger agreement, OfficeMax has to approve the sale of the Mexican unit.

“A sale of this asset at a full and fair price is clearly in the best interest of both Office Depot and OfficeMax shareholders,” Starboard said in a letter to Office Depot made public today in a statement.

Given that Gigante’s offer expires tomorrow, Office Depot should obtain consent from OfficeMax to immediately explore the sale, said New York-based Starboard, Office Depot’s largest shareholder with 14.8 percent.

Brian Levine, a spokesman for Office Depot, told Bloomberg News on Feb. 25 that OfficeDepot is still discussing a sale of its Mexico unit to Gigante.

“We are discussing it with the merger partner,” he said, adding that if OfficeMax approves, then the board would need to sign off on the deal.

The shares rose 1.3 percent to $4.04 as of 10:31 a.m. in New York. They increased 36 percent in the year through yesterday.

Office Depot de Mexico includes operations in Colombia and Central America. Office Depot entered the joint venture with Grupo Gigante in 1994, and the business has since expanded to more than 200 stores, according to regulatory filings.

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.

To contact the reporter on this story: Serena Saitto in New York at ssaitto@bloomberg.net

To contact the editor responsible for this story: Jeffrey McCracken at jmccracken3@bloomberg.net

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