Shares of OfficeMax rose sharply Friday after Boise Cascade LLC filed for an initial public offering. OfficeMax has a stake in the company.
THE SPARK: Wood products company Boise Cascade filed plans late Wednesday for a $200 million IPO. The timing and pricing have not been determined. OfficeMax owns about 20 percent of Boise Cascade, according to documents filed with the Securities and Exchange Commission, and would stand to gain from the offering.
THE BIG PICTURE: The two companies have been closely linked for some time. Boise Cascade Corp. bought the office products business in 2003 and changed its name to OfficeMax Inc. In 2004 OfficeMax sold its paper and forest products assets to a new company called Boise Cascade LLC, which was controlled by a private equity firm. That effectively split the forest products business from the retail business. As part of the deal, OfficeMax kept a financial stake in Boise Cascade.
THE ANALYSIS: KeyBanc Capital Markets analyst Bradley Thomas said that he believes that the investment could be worth $600 million to $700 million to OfficeMax.
Janney Capital Markets analyst David Strasser said that OfficeMax's holds roughly $110 million in Series A equity units that were not broken out in Boise Cascade's filing but have been before, which leads him to believe that a payment has been or will be made soon to OfficeMax. He also expects OfficeMax's would get a payment of more than $130 million and continue to hold a stake in the company following the deal.
SHARE ACTION: OfficeMax shares jumped $1.59, or 19.3 percent, to $9.82 in midday trading. Earlier in the session the stock soared to $10.62, a new 52-week high. The shares have not closed at that level since spring of 2011.