Shares of ODP, the Boca Raton, Fla., parent of the office-supplies retailer, at last check were falling 1.9% to $45. Staples is held by the New York private-equity firm Sycamore Partners.
In a letter to Sycamore, ODP Chairman Joseph Vassulluzzo said its board "unanimously concluded that there is a more compelling path forward to create value for ODP and its shareholders than the potential transaction described in your proposal."
Staples made the offer last week, proposing to buy ODP for $40 a share. Staples said it would pursue a public tender offer for ODP's shares in March if the companies didn't reach agreement on a deal.
Vassulluzzo said the offer makes it "readily apparent" that Staples' sole interest rests in acquiring ODP's retail and consumer-facing e-commerce operations.
"To accomplish that," the letter said, "your proposal, among other things, contemplates the divestiture of our commercial business unit (the B2B Business) to a hypothetical third-party buyer that has yet to be identified, on terms yet to be proposed, as well as the sale of our CompuCom IT services business."
Instead, the letter said Office Depot would be open to a joint venture combining the retail and e-commerce operations with Staples. The letter also suggests selling the two units to Staples.
"Indeed, we believe that such a transaction could be executed more efficiently and with far greater certainty and less regulatory risk than your proposal," said Vassulluzzo.
The Staples proposal, the letter said, "would expose ODP to material uncertainty, significant financial burden, and the risk of significant damage to ODP’s business in the event that regulatory approvals could not be obtained, as the experience of our prior failed transactions has shown."
Staples, which did not immediately responded to a request for comment, has twice tried to acquire Office Depot. Both attempts failed because of antitrust concerns.