Office Depot Activist Starboard Nominates Board Slate

Office Depot Inc. shareholder Starboard Value LP, which has pressured the retailer to improve operations, nominated six people to the chain’s board as it works to complete its merger with OfficeMax Inc.

The nominees include Starboard Chief Executive Officer Jeffrey Smith; Robert Nardelli, the former CEO of Home Depot Inc.; and James Fogarty, CEO of Orchard Brands Corp., according to a letter New York-based Starboard sent to the board today. The board currently has 10 members.

The board should be revamped whether Office Depot remains a standalone company or completes the merger with OfficeMax, said Starboard, which owns 14.8 percent of Office Depot’s outstanding shares. Office Depot, the second-largest U.S. office-supplies chain, said last month that it would acquire OfficeMax in a stock deal valued at $1.17 billion.

Starboard said Office Depot should have a vote on the nominees before it completes the merger. Office Depot hasn’t provided a date for its annual shareholder meeting. It was held in April last year. A date also hasn’t been set for a shareholder vote on the OfficeMax deal.

Office Depot, based in Boca Raton, Florida, rose 1.5 percent to $4.07 at the close in New York. Naperville, Illinois-based OfficeMax gained 1.5 percent to $11.95. Office Depot declined 11 percent from Feb. 15, the trading day before details of the deal were first reported, through today. The Standard & Poor’s 500 Index has gained 2.1 percent during that time.

Brian Levine, a spokesman for Office Depot, declined to comment. Representatives of Starboard didn’t respond to a request for comment.

CEO Selection

The chains said during the deal announcement that the new company’s board, which will have equal representation from each retailer, will select a new CEO once the merger is completed. Starboard supports the merger and wants to influence that choice by getting its candidates on the board, said a person familiar with the situation.

While Starboard’s nominees weren’t picked to be potential candidates for CEO of the merged company, that doesn’t mean one of the nominees couldn’t pursue the job, said the person, who asked not to be identified because the talks are private.

Starboard began pushing for changes at Office Depot last year after the retailer posted losses while businesses cut back on supply purchases. In October, Office Depot approved a takeover defense, known as a poison pill, that would give its investors additional shares if one entity surpasses 15 percent ownership.

The two sides had been engaged in discussions this year, and Office Depot said on Feb. 22 that its board had amended company bylaws to change the deadline for shareholders to nominate board candidates for the annual meeting.

Staples Inc. is the largest U.S. office-supplies chain.

(Updates with closing share prices in fifth paragraph.)
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