The critical components of the Board and management’s strategic plan include:
- Merger with OfficeMax: We are working diligently toward closing our proposed merger with OfficeMax announced in February 2013, creating the opportunity for Office Depot shareholders to benefit from an estimated $400-600 million in annual synergies as well as enhanced cash generation and liquidity for the company to fund internal and external opportunities for continued growth. The merger was recently approved by shareholders in July 2013, with over 98% of Office Depot shareholders voting in favor of the merger, and has been cited by numerous analysts as the right strategic step for the company.
- Sale of Office Depot de Mexico: We recently closed on the sale of our joint venture stake in Office Depot de Mexico to Grupo Gigante for approximately $690 million, an 11.6x EBITDA multiple, after long-term discussions with our joint venture partner over the future course of our arrangement with them. This sale generated after-tax proceeds of approximately $550 million, which significantly enhances the company’s liquidity as we integrate the OfficeMax transaction.
- Multi-year strategic plan: Outside of these transactions, we are making solid progress on our multi-year strategic plan, which has resulted in over $1 billion in benefits since 2007, including approximately $200 million in 2012 and an estimated $120 million in 2013.
Ironically enough, Starboard is openly supportive of most of the Board’s actions, including the merger with OfficeMax and sale of our interest in Office Depot de Mexico, among other actions. While we respect the right of all of our shareholders to have their voices be heard, now is not the time to replace any of our directors with new directors lacking detailed knowledge of our business and operations, given the importance of the successful closing and then integration of the OfficeMax transaction, in particular, to creating shareholder value. This is not the time for on-the-job training.Office Depot Is On the Right Track to Increase the Value of Your Investment The actions in motion right now to unlock Office Depot’s true value have taken years of careful planning and significant time and energy from the Board to negotiate and manage. A critical component of that plan -- the proposed OfficeMax merger -- has not yet closed and will require continued close attention from the Board. In fact, many of the critical issues related to the OfficeMax merger are actively being addressed and the Board is deeply involved in managing these pivotal decisions. This includes:
- Joint Board Committee Overseeing CEO Search – On April 9, 2013 we announced the formation of a joint board committee with OfficeMax to oversee the process to select a CEO for the combined company. This committee, led by Office Depot director Nigel Travis and OfficeMax director Jim Marino, has already moved ahead with this process by hiring global talent management consultancy Korn/Ferry International, which has commenced a search in line with a clear set of requirements developed by the committee.
- Integration Management Office – At the same time, we also announced the formation of a Steering Committee and Integration Management Office with OfficeMax to oversee integration planning, with the shared objective of mutually developing an integration plan designed to ensure a smooth and productive transition and capture the projected $400-600 million in annual cost synergies by the third year following the transaction’s close. This group is already hard at work and has hired the Boston Consulting Group to provide support to both companies.
These key operating initiatives, already well underway for 2013, include:
- Improving the web experience and making omni-channel a reality;
- Growing services and solutions;
- Increasing own brand and direct import penetration;
- Driving small- and medium-size business customer growth;
- Improving the International Division cost structure;
- Working with vendors to decrease cost of goods sold; and
- Reducing overall expenses.
Like you, we want what is right for Office Depot and all of its shareholders.Your vote is important in this election, and we urge you to vote TODAY so that your voice is heard. To elect the Office Depot’s Board’s nominees, we encourage you to vote by telephone, by Internet, or by signing and dating the enclosed WHITE proxy card and returning it in the postage-paid envelope provided. We urge you now to allow your Board and management team to do what is in the best interests of all shareholders – continue executing on our strategic plan for operational improvement, close the OfficeMax transaction, continue making progress on our CEO search, and our integration planning efforts to unlock real value for all shareholders. Thank you for your continued support.
|W. Scott Hedrick||Neil R. Austrian|
|Lead Director||Chairman and Chief Executive Officer|
|Your Vote Is Important, No Matter How Many Or How Few Shares You Own|
|If you have questions about how to vote your shares, or need additional assistance,|
|please contact the firm assisting us in the solicitation of proxies:|
|INNISFREE M&A INCORPORATED|
|Shareholders Call Toll-Free: (877) 825-8621|
|Banks and Brokers Call Collect: (212) 750-5833|
|We urge you NOT to vote using any Gold proxy card sent to you by Starboard,|
|as doing so will revoke your vote on the WHITE proxy card.|
OFFICE DEPOT SAFE HARBOR STATEMENTThis communication may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 concerning Office Depot, the merger and other transactions contemplated by the merger agreement, Office Depot’s long-term credit rating and its revenues and operating earnings. These statements or disclosures may discuss goals, intentions and expectations as to future trends, plans, events, results of operations or financial condition, or state other information relating to Office Depot, based on current beliefs of management as well as assumptions made by, and information currently available to, management. Forward-looking statements generally will be accompanied by words such as “anticipate,” “believe,” “plan,” “could,” “estimate,” “expect,” “forecast,” “guidance,” “intend,” “may,” “possible,” “potential,” “predict,” “project” or other similar words, phrases or expressions. These forward-looking statements are subject to various risks and uncertainties, many of which are outside of Office Depot’s control. Therefore, investors and shareholders should not place undue reliance on such statements. Factors that could cause actual results to differ materially from those in the forward-looking statements include adverse regulatory decisions; failure to satisfy other closing conditions with respect to the merger; the risks that the new businesses will not be integrated successfully or that Office Depot will not realize estimated cost savings and synergies; Office Depot’s ability to maintain its current long-term credit rating; unanticipated changes in the markets for its business segments; unanticipated downturns in business relationships with customers or their purchases from Office Depot; competitive pressures on Office Depot’s sales and pricing; increases in the cost of material, energy and other production costs, or unexpected costs that cannot be recouped in product pricing; the introduction of competing technologies; unexpected technical or marketing difficulties; unexpected claims, charges, litigation or dispute resolutions; new laws and governmental regulations. The foregoing list of factors is not exhaustive. Investors and shareholders should carefully consider the foregoing factors and the other risks and uncertainties that affect Office Depot’s business described in its Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other documents filed from time to time with the SEC. Office Depot does not assume any obligation to update these forward-looking statements.