By David Benoit
Starboard Value LP is calling for office-supply chains Staples
Inc. and Office Depot Inc. to merge in a letter it plans to release
Tuesday, the first time the activist has publicly declared itself
in support of a tie-up of the rivals since taking a stake in
Staples last month.
The investor owns a roughly 6% stake in Staples and around 10%
of Office Depot.
In a letter to Staples, reviewed by The Wall Street Journal, the
activist says the cost cuts in a combination could more than double
operating profits and that the two chains could be more efficient
about closing stores when combined.
Starboard's letter says it has met with management of both
companies to urge the deal and says if Staples management doesn't
seriously pursue the transaction it would be "a clear sign that
significant leadership change is needed at Staples."
Representatives from Staples and Office Depot weren't
immediately available for comment Tuesday.
Staples last week announced changes to its board, adding a
Google Inc. executive as a new director and changing lead
independent directors. The company also said it would take a step
toward separating the chairman and chief executive roles, currently
held by Ron Sargent. Mr. Sargent also declined to accept a
raise.
Starboard's letter applauded those moves, though it said the
step to separate the chairman and CEO jobs came long after
shareholders voted for such a change last year. The activist said
those announcements spurred it to release its letter publicly.
At Staples, the deadline to nominate board members or start a
proxy fight is in early March.
Shares of Staples and Office Depot each slipped in morning
Tuesday. Overall, Staples is up 17% since Starboard announced its
stake in December, while Office Depot has risen 19%.
Write to David Benoit at david.benoit@wsj.com
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