(Bloomberg) — The parent of the Office Depot retail chain plans to split into two publicly traded companies, reshaping the company as rival Staples pursues an acquisition.
ODP Corp. 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. The transaction, expected to be completed in the first half of 2022, will occur through a distribution of shares of the new company as a tax-free dividend to ODP’s shareholders, according to a statement Wednesday.
The transaction will aid the company in “improving our ability to meet the needs of our customers, while better matching assets and investment profiles of both companies to generate greater value for our shareholders,” Gerry Smith, chief executive officer of ODP, said in the statement.
Shares of ODP climbed 9.5% as of 8:23 a.m. before regular trading in New York. The stock had gained 45% this year through Tuesday.
The move, which ODP said will allow for more targeted investment, comes as Sycamore Partners-backed Staples continues to pursue an acquisition. The rival office-supply chain had made an offer earlier this year, which ODP said wasn’t likely to overcome regulatory hurdles. Still, the Office Depot parent said it was open to reworking the terms of a deal.
Under Smith, Office Depot has been cutting costs and trying to push more into services. The company acquired CompuCom, a tech-services provider, in 2017 for about $1 billion as a hedge against declining demand for core office supplies such as paper. But the division has struggled and is now up for sale.
In 2020, the Business Solutions Division, which would make up the core of the new firm, generated $4.7 billion in revenue — about half of ODP’s total sales. Retail tallied $4.2 billion.
(Updates with quote from CEO in third paragraph.)
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