Office Depot to Buy THL-backed CompuCom for $1B


BOCA RATON, Fla.–(BUSINESS WIRE)–Office Depot, Inc. (NASDAQ:ODP) today announced it is pivoting the company from a traditional office products retailer to a broader business services and technology products platform. As the first step in this new strategic direction, the company has entered into a definitive agreement to acquire CompuCom Systems, Inc., a market-leading provider of award-winning IT services, products and solutions that enable the digital workplace for enterprise, small and midsize businesses. The company also provided a preliminary estimate of third-quarter financial results and a lowered outlook for Office Depot’s stand-alone business for 2017.

“Technology is the office supply of the future,” said Gerry Smith, chief executive officer of Office Depot. “Today marks a significant milestone as we move to provide a unique business services platform for our current and future customers. Acquiring CompuCom is the first step in this new strategic direction. The combination of CompuCom’s enterprise IT services with our millions of customers and approximately 1,400 distribution points gives us the credibility and scale to build a sustainable platform and stand apart from the competition. The company will create value for shareholders from a diversified revenue base with a clear opportunity to grow higher value services and business-to-business revenues.”

Under the terms of the agreement, Office Depot will acquire CompuCom from Thomas H. Lee Partners, L.P., a premier private equity firm, for a total consideration of approximately $1 billion, which includes the repayment of CompuCom debt and issuance of new Office Depot shares. Following the transaction, THL will hold an equity position in Office Depot of approximately 8% of total shares outstanding.

Founded in 1987, CompuCom provides highly-rated managed IT services to businesses with over 5.1 million unique end users. CompuCom’s team of approximately 6,000 licensed technicians is the largest employee field technician workforce in North America, providing remote and onsite technology support. CompuCom procures, installs and manages the lifecycle of hardware and software for businesses, and offers IT support services including remote help desk, data centers and on-site IT professionals. CompuCom was positioned in the Leaders quadrant of Gartner’s® most recently released Magic Quadrant® for Managed Workplace Services, North America. CompuCom has established long-term relationships with hundreds of blue chip customers, including six of the top 10 Fortune 500 companies, and many small- and medium-sized businesses, including local franchises of national brands.

“Together with Office Depot we can create a distinctive offering for our enterprise and SMB customers and accelerate our growth,” said Dan Stone, chief executive officer of CompuCom. “The workplace has truly moved to a digital environment with the average worker having over four connected devices. Office Depot’s established brand and large national footprint will help to drive the expansion of our offerings to more markets and build on our client-focused success to welcome new customers seeking high-quality technology services and solutions.”

“We strongly believe in the compelling opportunity to create value for shareholders in this combination and look forward to supporting Office Depot in this next chapter,” said Soren Oberg, managing director at Thomas H. Lee Partners. “Office Depot is an ideal partner for CompuCom, as their strengths are highly complementary and, together, they will have a strong foothold in the fragmented managed services market and greater opportunities for growth.”

Financial Impact

Stephen Hare, chief financial officer of Office Depot added: “With this acquisition, we immediately add CompuCom’s significant, recurring revenue stream and proven service offerings to our platform, allowing us to quickly build scale. Together we will build deeper relationships with our business customers and provide the solutions they need, while generating long-term, sustainable value for our shareholders.”

The acquisition of CompuCom is expected to accelerate Office Depot’s ability to enhance shareholder value and pursue topline growth. While Office Depot intends to provide greater detail surrounding the long-term financial impact of the transaction during its next earnings call in November, Office Depot expects to:

Add approximately $1.1 billion of revenue

Deliver expected cost synergies of over $40 million within two years

Realize substantial revenue synergies over time as a result of the opportunity for CompuCom to access Office Depot’s multi-channel customer base

Office Depot has a demonstrated track-record of success in integrating acquisitions and delivering synergies, including over $750 million in cost savings from the OfficeMax acquisition alone.

Office Depot will finance the acquisition with new debt and the issuance of approximately 45 million shares of its common stock to THL. Office Depot expects to refinance CompuCom’s existing debt with a new term loan of approximately $750 million. Following the close of the transaction, Office Depot expects to maintain substantial financial flexibility with low balance sheet leverage, strong liquidity, and positive free cash flow available for debt repayment, capital returns to shareholders and growth initiatives.

Office Depot remains committed to returning capital to shareholders including its current cash dividend plan. The existing share buyback plan authorized by the Board of Directors remains in place.

Preliminary Q3 Results and Full-Year Outlook (3)(6)

Office Depot expects to report its third-quarter 2017 financial results in November. Based on a preliminary assessment, the company expects to report(5):

Total reported sales decline between 7-8% for the quarter including store closures.

Between 5-6% decline in comparable retail store sales.

Between 5-6% decline in constant currency sales within the BSD.

Adjusted operating income(2)between $125-$135 million for the quarter.

Free cash flow(4)from continuing operations of approximately $200 million for the quarter.

Approximately $750 million in cash and cash equivalents and approximately $1 billion available under the Amended and Restated Credit Agreement, for total available liquidity of approximately $1.75 billion. Total debt of approximately $285 million excluding non-recourse debt.

Office Depot expects to provide an updated long-term outlook, including the impact of the CompuCom acquisition, with the announcement of its third-quarter 2017 financial results, however the company has lowered its outlook for 2017.

Adjusted operating income(2) for fiscal 2017 is now estimated to be between $400-$425 million, excluding the impact of this transaction, compared to the previous estimate of approximately $500 million. Depreciation and amortization for the year is still estimated at $150 million with capital expenditures totaling $125 million compared to the previous estimates of $150 million for capital expenditures. Our updated guidance is driven by a number of factors, including:

Three hurricanes in the U.S. and Puerto Rico, where a significant concentration of our retail and BSD customers are located, particularly in Texas, Florida and Puerto Rico.

Lower sales and store traffic during this year’s back to school period, which is typically a strong season for Office Depot.

Temporary higher supply chain costs arising primarily from transition issues related to planned consolidation of vendors and warehouses.

Professional fees and other costs related to developing our strategy and transition to a broader omnichannel business services platform.

“We have moved quickly to make the necessary management and operational changes to address these performance issues, while investing in our services platform to prepare for this transaction with CompuCom,” commented Gerry Smith.

“We are focused on building stable and recurring service offerings that leverage our omnichannel platform and deliver the solutions our customers need, and strongly believe it can unlock significant value to our shareholders as we position Office Depot for the future.”

Approval Process

This transaction is subject to customary closing conditions, including required regulatory approvals. This transaction is not subject to a shareholder vote and is expected to close by the end of the year.


Goldman Sachs & Co. LLC is serving as financial advisor to Office Depot. Wachtell, Lipton, Rosen & Katz is serving as legal counsel. Weil Gotshal & Manges LLP is serving as legal counsel to CompuCom.

Additional information regarding the CompuCom acquisition and accompanying presentation can be found on Office Depot’s website in the “Investor Relations” section.

About Office Depot, Inc.

Office Depot, Inc. is a leading provider of office supplies, business products and services delivered through an omnichannel platform.

The company had 2016 annual sales of approximately $11 billion, employed approximately 38,000 associates, and served consumers and businesses in North America and abroad with approximately 1,400 retail stores, award-winning e-commerce sites and a dedicated business-to-business sales organization – with a global network of wholly owned operations, franchisees, licensees and alliance partners. The company operates under several banner brands including Office Depot, OfficeMax and Grand & Toy. The company’s portfolio of exclusive product brands include TUL, Foray, Brenton Studio, Ativa, WorkPro, Realspace and Highmark.

Office Depot, Inc.’s common stock is listed on the NASDAQ Global Select Market under the symbol “ODP.”

Office Depot is a trademark of The Office Club, Inc. OfficeMax is a trademark of OMX, Inc. ©2017 Office Depot, Inc. All rights reserved. Any other product or company names mentioned herein are the trademarks of their respective owners.

About CompuCom

CompuCom Systems, Inc., a global company headquartered in North America, provides IT managed services, infrastructure solutions, consulting and products to Fortune 1000 companies committed to enhancing their end users’ experience. Founded in 1987, privately held CompuCom employs approximately 11,500 associates. For more information, visit

About Thomas H. Lee Partners, L.P.

Thomas H. Lee Partners, L.P. is a premier private equity firm investing in middle market growth companies, headquartered in North America, exclusively in four industry sectors: Business & Financial Services, Consumer & Retail, Healthcare, and Media, Information Services & Technology. Using the firm’s deep domain expertise and the internal operating capabilities of its Strategic Resource Group, THL seeks to create deal sourcing advantages, and to accelerate growth and improve operations in its portfolio companies in partnership with management teams.

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