Office Depot Parent Rejects Bids, Says Retail and B2B Office Supply Biz Is ‘Better Together’

A multi-year process that would have put Staples, Office Depot, OfficeMax under one roof was officially rejected Tuesday (June 21), as the board of ODP Corp. announced the sale or spin-off of its consumer businesses would not proceed.

“Given current market and macroeconomic conditions, as well as the benefits of maintaining purchasing and supply chain synergies, the Board has determined that now is not the right time to further pursue separating the Company into two independent, publicly traded companies,” said Joseph Vassalluzzo, chair of the Board of Directors of The ODP Corporation in a press release, which owns Office Depot, OfficeMax and half dozen other brands.

Citing the benefits derived from scaling and operating collectively under the holding company structure, CEO Gerry Smith said “Office Depot, ODP Business Solutions, Veyer and Varis are better together as a value creating enterprise at this time.”

The announcement follows a review of both “public and private non-binding proposals” that ODP received for its pair of consumer brands which include about 1,000 retail locations.

Although not named in today’s release, New York-based private equity firm Sycamore Partners, which specializes in retail turn-arounds and acquired office supply rival Staples for $6.9 billion in 2017, had been looking to buy certain ODP assets since January of 2021, a deal ODP’s board had initially rejected in favor of a plan that would have combined the three retail brands.

In an email to PYMNTS, a spokesman for Sycamore Partners said the company had no comment on the ODP announcement or the changing market dynamics for office supply retailing.

Booming Work From Home Shift

To be sure, ODP’s decision comes at a unique time for the office supply retail segment, which faces the same inflation and supply chain-related logistical challenges as the entire industry yet is also undergoing an unprecedented shift towards working from home and away from offices.

With the number of remote workers rising steadily throughout the pandemic and undergoing a transition from a temporary or stop-gap solution to a permanent way of life for millions of employees around the world, the procurement of office supplies has changed with it.

As the procurement of the goods and supplies needed to build and stock home offices continues to grow, a shift from the large, single orders from centrally based buyers to multiple, small retail and online purchases is following suit.

As a result, PYMNTS research and reporting has shown a dramatic increase in demand for spend management and software systems that simplify the decentralization of approving and reimbursing this growing army of remote employees.

By keeping a robust retail and B2B sales operation intact and being able to take advantage of of the economies of scale available to the combined business, ODP has made a decision that echoes that of other retailers, including department store leader Macy’s which announced its own decision in February to stick with its present omnichannel approach.

“Following the completion of that review, the [ODP] Board of Directors unanimously determined it is in the best interests of the Company and its shareholders not to divest the consumer business at this time,” the latest statement concluded.  At the same time, the 35-year-old retailer said that it had also decided not to resume a previously announced potential separation and would instead “maintain all of its businesses under common ownership.”