Office Depot pays $1.1B for IT vendor

CompuCom acquisition part of move into business services

Office Depot said Tuesday it has agreed to acquire CompuCom, an IT provider for small to mid-sized businesses. The move gives 8 percent of Office Depot’s shares to Boston-based private equity firm, Thomas H. Lee Partners.

CompuCom, which is headquartered in Texas, has about $1.1 billion in annual sales, according to Office Depot.

The acquisition is part of Office Depot’s strategy to pivot from a traditional office-supply retailer to a broader business services and technology provider.

“Technology is the office supply of the future,” said Gerry Smith, CEO of Office Depot, which is headquartered in Boca Raton. “Today marks a significant milestone as we move to provide a unique business services platform for our current and future customers. Acquiring CompuCom is the first step in this new strategic direction.”

CompuCom CEO Dan Stone said with Office Depot, the company can provide a “distinctive offering” of technology solutions for business customers.

Office Depot will acquire CompuCom from Thomas H. Lee Partners, for a about $1 billion, which includes the repayment of CompuCom debt and the issuance of new Office Depot shares. Following the transaction, Lee Partners will hold an equity position in Office Depot of about 8 percent of the total shares outstanding.

News of the transaction, which was announced after the markets closed, depressed Office Depot stock by 8.5 percent to $4.20 in after-hours trading on the Nasdaq.

Since its founding in 1974, Lee Partners has raised more than $22 billion of equity capital, acquired more than 140 portfolio companies and completed more than 360 add-on acquisitions. The firm has investments in health care, retail, business and financial services, media and technology.

On Tuesday, Office Depot also gave a preview of its third-quarter earnings. Management said it expects a total sales decline between 7 percent and 8 percent over a year ago, and comparable store decline — which measures stores open for at least a year — of 5 percent to 6 percent.

Office Depot, which had $11.7 billion in 2017 revenues, has been working to reinvent itself, particularly since Smith was named CEO in January. The retailer has been facing a shrinking office-supply retail market.

The company tried to merge with rival Staples but the deal fell apart in 2016 after regulators challenged it in court for anti-competitiveness to business customers. Staples, which is based in Massachusetts, has since gone private.

mpounds@sunsentinel.com, 561-243-6650, Twitter @marciabiz