Office Depot and Starboard Value LP (“Starboard”) reached an agreement on the makeup of the board of directors for the soon-to-be newly formed entity created by the merger of Office Depot and OfficeMax.
Office Depot stockholders met in Boca Raton, Florida on August 21, 2013 for its annual meeting and election of board members. It was widely anticipated a proxy fight would take place with Starboard leading the way. However, Starboard, the private equity firm that owns approximately 15 percent of the stock of Office Depot agreed to a deal resulting in the resolution of the most contentious issue of the merger.
The merger is still under review by the Federal Trade Commission; however, both companies hope to have the merger finalized by the end of the year.
Office Depot and Starboard agreed to vote for Office Depot’s nominees on the board in a deal that would seat three Starboard nominees on the new board, Jeffrey Smith, current Starboard CEO, Joseph Vassalluzzo, former Staples executive, and Cynthia Johnson. In addition, two current board members will resign, and the board would also be increased from 10 to 11 members.
The two resigning board members are Marsha Evans, a retired Naval Rear Admiral and board member since 2006, and W. Scott Hedrick, the current Lead board member and a board member since 1991. Joseph Vassalluzzo will be appointed to fill the position left by Ms. Evans and he will also join the search committee for the new CEO.
Neil Austrian, Office Depot Chief Executive Officer, and Jeffrey Smith agreed in a statement the settlement regarding the new members of the board of directors was “In the best interest of the shareholders.”
Shareholders who came to the meeting expecting to hear more about Starboard’s plans and expecting to vote were apparently surprised to learn of the settlement.
Mr. Austrian has indicated once a CEO is selected, the CEO would likely make a recommendation to the board regarding where the new entity would be headquartered. He has also indicated there have been discussions with Governor Rick Scott and with Enterprise Florida, the state’s public-private partnership for economic development, involving potential economic incentives to keep Office Depot in Boca Raton.
Shareholder, Rol Meillier from Coral Springs supports the nominees, saying, “They have a plan in place and it should be executed.” Shareholder Tom Thayer from Boca Raton is generally opposed to “dissident shareholders”, saying, “They are not out to build a company.”
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