Activist investor Starboard Value's disclosure that it bought a 5.1 percent stake in Framingham's Staples Inc. and upped its Office Depot Inc. holding to 9.9 percent indicates the New York hedge fund will push for a merger of the two office supplies chains, according to analysts.
And while that would leave a single dominant U.S. office supplies retailer, Starboard is confident the Federal Trade Commission would approve it, Bloomberg reported, citing a person familiar with the matter. The FTC signed off on Office Depot's $1.2 billion merger with OfficeMax last year without imposing conditions.
Starboard did not return calls for comment. Its regulatory filings stated that Staples' and Office Depot's shares were "undervalued and represented an attractive investment opportunity" and outlined possible future actions including "making recommendations or proposals … concerning changes to the ... ownership structure ... industry consolidation or potential business combinations."
B. Riley & Co. analyst R. Scott Tilghman sees far more reluctance on the part of struggling Staples' to pursue an acquisition or merger than Office Depot. "Staples historically has had the belief that as the frontrunner of the industry, they understood how to operate and, over time, would continue to gain share over their rivals," he said. "Unfortunately, in recent years, especially after the Office Depot-OfficeMax merger announcement, that hasn't been the case."
Starboard's stakes in both retailers hint at a possible merger in the works given its involvement in the Office Depot/OfficeMax merger, Citi analyst Kate McShane said "If they cannot achieve this, due most likely to FTC concerns, we think they will push to have one or both of these companies sold," she said.
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