Private Equity To Office Depot Rescue (ODP, OMX, SPLS)

Office Depot, Inc. (NYSE: ODP) has recovered substantially off of its March lows, but the stock is bruised and battered when you consider it hit $40.00 in late 2006.  But this morning the office supply store chain announced that funds advised by BC Partners, an international private equity firm, had invested $350 million in the company.  This may even have some implications for the competition with OfficeMax Inc. (NYSE: OMX) and Staples, Inc. (NASDAQ: SPLS).

BC Partners is purchasing approximately $275 million of the company’s newly created 10% Series A Redeemable Convertible Perpetual Preferred Stock.  It is also purchasing $75 million of the Company’s newly created 10% Series B Redeemable Conditional Convertible Perpetual Preferred Stock.

The transaction closed this morning with the completion of the sale of the preferred shares to funds advised by BC Partners and the corresponding receipt of proceeds by Office Depot.

Office Depot will use the proceeds for general corporate purposes.  The timing of this investment looks like it will help Office Depot’s books.  At the last quarter it held only about $176 million in cash. Right at the open, shares are up 5% at $4.00 and the 52-week range is $0.59 to $12.31.

The question is whether or not this will just help the company stay better afloat or whether it will be better able to compete.  OfficeMax Inc. (NYSE: OMX) shares are up 2% at $5.56 and Staples Inc. (NASDAQ: SPLS) is down 0.3% at $19.93 right after the open.

BC Partners is more than 20 years old with offices in Europe and the U.S. and funds advised by the group have invested in 68 companies with a total enterprise value of 64 billion Euros.  A current investment that will be easily recognized in the U.S. is Intelsat, and the full current portfolio can be seen here.

Jon C. Ogg
June 23, 2009