Office Depot (NYSE:ODP) Alters 'Change of Control' Provisions in Contracts of 7 Executives

Even though Office Depot (NYSE:ODP) says the alteration in the change of control provisions within the contracts of 7 executives came about from simple expirations and was the normal course of action, the market has assumed there's more to it.

FBR said, "ODP issued an 8-K 12/21 after the close that altered the change of control provisions within the contracts of 7 executives. The company indicated that the former provisions within these executives' had expired as of 10/10 and the changes were normal course. The equity market speculated that the company could be entertaining something more strategic, as was evident in media reports and yesterday's 9.1% appreciation in the share price versus the .3% rise in the S&P 500. Our rating on ODP is based on the risk/reward investment merit of a turnaround, the prospects of a new CEO and a more dynamic, more involved BOD (Board of Directors). 3 of the 13 member BOD are from private equity investment firm, BC Partners, with a new 20% stake in the company (via a convertible bond).

"Mexico alone has received in the past a $325M after-tax bid. International (x Mexico) will generate by our math $143M in EBITDA NTM (assuming a 10% allocation of corporate overhead and corporate D&A). SPLS paid 10x for Corporate Express (CXP) in 7/08. So, using this valuation, tax considerations vs. our estimated net book value for international (x Mexico) to the international segment, we derive a $1.3B value potential for the international segment and a $325M net value potential for Mexico ($1.625B in total). This does not attempt to take into account the complexities of any potential tax savings form $1.1B in foreign tax loss carryforwards (NOL's) and $901M in U.S. State NOL's. ODP's total company enterprise value is currently $1.96B."

FBR Capital reiterates an "Outperform" on Office Depot, which closed at $5.45, up $0.17, or 3.22 percent as of 12:18 PM EST.