Shares of ODP (ODP) surged Wednesday after the Office Depot parent reported better-than-expected first-quarter earnings and unveiled plans to spin off its distribution business into a separate publicly traded company.
The board also approved a new $300 million stock repurchase.
Shares of the Boca Raton, Fla., company at last check rose 8.2% to $45.94.
For the quarter, GAAP net income rose 18% to $53 million, or 95 cents a share, from $45 million, or 84 cents a share, in the year-earlier quarter.
ODP reported adjusted earnings of $68 million, or $1.21 a share, ahead of the FactSet consensus estimate of 72 cents a share.
Revenue came in at $2.36 billion, off 13% from $2.72 billion a year earlier and below the FactSet estimate of $2.41 billion.
The company marked "the continued evolution of our B2B pivot and digital transformation, drove solid quarterly results, and took the next step in unlocking shareholder value," Chief Executive Gerry Smith said in a statement.
Office Depot said it would retain its retail consumer and small-business products and services while separating its Business Solutions Division contract unit and independent regional office-supply distribution operations.
Via the transaction, expected to close in first-half 2022, ODP holders will receive a distribution of shares of the new company as a tax-free dividend, a statement said.
The record date for the distribution hasn't yet been set. The spinoff is subject to conditions including final approval from the board; opinions from ODP's tax counsel and from the Internal Revenue Service that the spinoff is tax-free to holders; registration with the Securities and Exchange Commission, approval of the new company's stock for listing on an exchange, and completion of any necessary financings.
ODP holders will not have to vote on the deal.
When ODP splits in two, "all stakeholders will benefit from the increased strategic focus and flexibility, aligned capital structures and growth profiles, which will enhance our prospects for long-term value creation," Smith added.