It is amazing to read the process in the proxy of how they did the deal. It shows you how much corruption there is on Wall Street. The stock hit a high in the summer of $9.47 when the Company had an offer of $10.30 on the table. Management does not close on the deal and the stock drops back down to $6.00. Management then agrees to take $9.00 a share. This goes to show that there is still meat on the bone. The buyout number should be at least $11.00 per share. In reading this they had at least 6 others looking at them prior to accepting the deal.
RAD has a no-shop provision with a “fiduciary out,” which means that it cannot talk to other potential purchasers while the transaction is pending. However, the “fiduciary out” does allow RAD to talk to a bidder who makes an unsolicited approach if the Board of Directors believes such talks can lead to a bona fide superior offer.
Sentiment: Strong Buy
Nice upgrade today noting that they anticipate the deal to be approved.
I just went back to read the report that the FTC issued on November 1, 2013 on the conclusion of the ODP and OMX merger. Based on that report, I would be shocked if they concluded not to approve the SPLS/ODP merger. At the very worse case - the FTC could have conditions of the deal. At that point SPLS would need to conclude that it still is a good deal. Classic government - BS.
Staples and Office Depot have surrounded themselves with a lot of smart people. The wording on the latest press releases feel very positive. Their lawyers would not allow such positive comments if they had a lot of concerns about the FTC not approving the transactions. In addition, Staples did their homework prior to entering into this transaction. They had full access to the work that was done on the ODP/OMX transaction and the FTC. They need to pay about a $250 million to ODP if the deal is not approved by the FTC. Take that along with about $250 million in legal and internal cost - $500 million is a lot to spend on a deal that you do not think will close. Hang on gang - this deal will close.
I am surprised that the FTC is taking this much time to conclude on the transaction. From a business stand point it will help the survival of 2 Companies and the employees. The risk of increase in the cost of office supplies is minimal. Everyone sells office supplies and with the internet the market share that a joint company would have is still not material. Plus and this is the big part, the cost of entry to this industry is not hard. Another good fit for ODP would be Best Buy. Best Buy has a lot of the same suppliers and would be a way for BBY to expand. I am still keeping my fingers crossed that this deal closes.