Office Depot Inc., finding its footing after a merger with Staples Inc. was blocked last week, will enlist Bain & Co. to conduct a strategic review of its business.
The retailer is working with Bain on a range of ways to structure its capital and provide a return to shareholders, according to a statement on Monday. Office Depot also will get $250 million in cash from Staples this week as a breakup fee. In addition, Office Depot extended its asset-based credit line for five more years, providing another source of financing. The $1.2 billion line matures on May 13, 2021, the company said.
“Our board and management team are committed to taking actions necessary to leverage this foundation and create value for shareholders,” Chief Executive Officer Roland Smith said in the statement.
U.S. District Judge Emmet Sullivan in Washington blocked the $6.3 billion merger with Staples last week. That handed a victory to the Federal Trade Commission, which argued that uniting the national office suppliers would harm buyers. The companies formally terminated their agreement on Monday.
Office Depot is now faced with trying to reverse a decline in sales without Staples’ help. The chain is contending with online competitors, a flagging share price and slow traffic at many shopping centers. But Office Depot is still wringing synergies from its earlier merger with OfficeMax, Smith said. The company expects to exceed $700 million in savings from that combination.
Office Depot shares have lost 38 percent of their value this year. The stock declined 5.2 percent to $3.49 on Monday in New York.
The failed Staples takeover brought expenses of about $140 million, Office Depot said. But retention was the biggest cost, and that won’t be as big a drain now that the merger is off the table, the company said.