As it prepares to merge with OfficeMax, Inc., Office Depot, Inc. announced that it has reached an agreement to sell its 50% stake in Latin American Joint Venture Office Depot de Mexico S.A. de C.V. to Grupo Gigante, S.A.B. de C.V. for the Mexican Peso amount of 8.78 billion in cash, or U.S. $687.4 million at today’s conversion rate. Office Depot pointed out that the deal is conditional on receiving Mexican regulatory and Grupo Gigante shareholder approval.
Office Depot stated a belief that Grupo Gigante shareholder approval will come within 30 days. After the transaction close, Grupo Gigante, S.A.B. and its affiliates will have 100% ownership of Office Depot de Mexico, the American retailer related.
In accordance with the terms of its planned merger agreement with OfficeMax, announced on February 20, Office Depot noted that it obtained the required consent from OfficeMax to proceed with the sale.
“Grupo Gigante has been a wonderful partner in Mexico for almost 20 years,” said Steve Schmidt, Office Depot international president, in comments on the transaction. “Over the past year, we have been actively exploring with them ways to illuminate the value of this business through a potential IPO. Through the process, they expressed a desire to own the business outright that culminated in the sale announced today.”
Mike Newman, executive vp and CFO for Office Depot, said, “We believe that this transaction represents a very attractive value for our shareholders. We expect to use the estimated $550 million in net after-tax proceeds from the sale to redeem 50% of the company’s convertible preferred shares held by BC Partners, Inc. and its affiliates upon receiving shareholder approval of the planned merger with OfficeMax, as well as to redeem the $150 million of maturing 6.25% bonds due in August 2013. Importantly, this transaction will significantly enhance the liquidity position of the combined company following the planned merger.”