Office Depot makes $1 billion acquisition

Office Depot took a first step toward its goal of transforming itself from a traditional office products retailer to a broader business services and technology products platform.

The company announced it has entered into a definitive agreement to acquire CompuCom Systems, a provider of IT services, products and solutions that enable the digital workplace for enterprise, small and midsize businesses, from private equity firm Thomas H. Lee Partners. The transaction is put at approximately $1 billion, which includes the repayment of CompuCom debt and issuance of new Office Depot shares.

Office Depot expects the purchase to add $1.1 billion of revenue and more than $40 million in cost synergies within two years. The retailer said the two companies will be positioned to capture market share in a $25 billion, highly fragmented market as the first entity to provide a nationwide, comprehensive network of enterprise-level tech services and products. CompuCom’s established SMB offering, Tech-Zone, will be placed in Office Depot’s stores, providing immediate scale and driving traffic into the retailer's locations.

“Technology is the office supply of the future,” said Gerry Smith, CEO of Office Depot. “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. The combination of CompuCom’s enterprise IT services with our millions of customers and approximately 1,400 distribution points gives us the credibility and scale to build a sustainable platform and stand apart from the competition.”

Founded in 1987, CompuCom provides managed IT services to businesses with over 5.1 million unique end users. Its team of approximately 6,000 licensed technicians is the largest employee field technician workforce in North America, providing remote and onsite technology support. CompuCom procures, installs and manages the lifecycle of hardware and software for businesses, and offers IT support services including remote help desk, data centers and on- site IT professionals.

Following the transaction, Thomas H. Lee Partners will hold an equity position in Office Depot of approximately 8% of total shares outstanding.

“We strongly believe in the compelling opportunity to create value for shareholders in this combination and look forward to supporting Office Depot in this next chapter,” said Soren Oberg, managing director at Thomas H. Lee Partners. “Office Depot is an ideal partner for CompuCom, as their strengths are highly complementary and, together, they will have a strong foothold in the fragmented managed services market and greater opportunities for growth.”