Office Depot, Starboard Finally Reach Settlement One Day Ahead Of Annual Meeting

(RTTNews) - Office products retailer Office Depot, Inc. (ODP) has late Tuesday reached a settlement agreement with its largest shareholder, Starboard Value L.P., just a day ahead of its Annual Meeting of Shareholders that is scheduled for Wednesday. Starboard Value owns about 14.6 percent of the outstanding common stock of Office Depot.

The settlement comes hours after the company had announced earlier in the day that it failed to reach a 'good-faith compromise' with Starboard Value.

The settlement will see Starboard Value withdraw its proxy solicitation, with a commitment to vote the White proxy card in favor of Office Depot's director nominees.

"We are very pleased to have reached an agreement with Starboard which we believe is in the best interests of all our shareholders. The resolution will allow us to continue our progress and momentum in our proposed merger with OfficeMax. Integration planning and the CEO search are already well underway and the merger is on track to close on or before year-end," Office Depot Chairman and CEO Neil Austrian said in a statement.

In return for the proxy solicitation withdrawal, Starboard Value nominees Cynthia Jamison, Jeffrey Smith, and Joseph Vassalluzzo have agreed to join the Office Depot Board. These three Starboard nominees were also recommended by ISS and Glass Lewis. The appointment will be made after the resignation of current directors Marsha Evans and Scott Hedrick on Thursday.

The appointment of the three Starboard Value nominees will also see the expansion of the board to eleven members from the existing ten to accommodate the additional Starboard Value nominee. Vassalluzzo will then replace Evans in the CEO Selection Committee that was constituted to search for the CEO of the combined company. Additionally, the new directors will elect a new non-executive lead director.

Office Depot noted that it will include both Smith and Vassalluzzo as continuing directors if the merger with peer OfficeMax, Inc. (OMX) is completed.

The two companies revealed earlier in the month that the CEO Selection Committee has reviewed and vetted more than 100 candidates, with eight of the top candidates already having been interviewed and narrowed to "five exceptional candidates".

OfficeDepot and OfficeMax had hired executive search firm Korn/Ferry International (KFY) to assist the CEO Selection Committee in its comprehensive search.

Office Depot agreed on February 20 to acquire OfficeMax in an all-stock merger deal valued at about $1.2 billion to create an 18 billion global office solutions company in order to fight competition from market leader Staples, Inc. (SPLS) and Amazon.com, Inc. (AMZN). The deal is expected to close by the end of calendar year 2013.

"As Office Depot's largest shareholder, we look forward to working together with the Office Depot Board with the common goal of maximizing value for all shareholders through the OfficeMax transaction and the CEO selection process," said Jeffrey Smith, Managing Member, CEO and CIO of New York-based investment adviser Starboard Value.

Office Depot initiated the negotiations with Starboard Value late last week after hearing from its shareholders that they were supportive of adding new perspectives to the company's board. Starboard Value was seeking the election of four of its candidates. The negotiations got stronger through the weekend and through late last night.

Earlier in the day, Starboard Value had charged Office Depot of not being willing to engage in constructive settlement discussions for the past months. It added that Office Depot is demonstrating the willingness to reach a compromise after coming under pressure from shareholders and proxy advisory firms as the Annual Meeting of Shareholders nears.

ODP closed Tuesday's regular trading session at $4.24, up $0.09 or 2.17% on a volume of 4.43 million shares.