If the deal closes, their target is actually $5.80.
Raising price targets as deal likelihood increases
We raise our ODP and OMX price targets to reflect a higher probability of a
transaction, as well as underlying earnings changes. We maintain our view
of a high (30-50%) probability of M&A activity, but move the weighting of
the M&A component in our price targets to the high end of that band (i.e.,
For OMX, we now explicitly also factor in cash distributed by Boise LLC to
equity holders, and its stake in the recently IPO’d Boise Cascade. For ODP,
we now include additional value for its Mexican subsidiary, which sits
below the EBITDA line, and in our view was not being recognized by the
market in valuation. Our new EV/EBITDAR- and M&A-based 12-month
targets are $5.00 for ODP, and $14.00 for OMX.