In a report published Friday, Bank of America analyst Denise Chai reiterated a Buy rating on Office Depot (NASDAQ: ODP), and raised the price target from $8.00 to $9.50.
In the report, Bank of America noted, “We see a possible acquisition of ODP by SPLS as increasingly likely for two reasons: 1) Starboard's involvement and agenda (given its track record in office retail and other transactions coupled with the obvious synergies from a combination) and 2) improved confidence in the longer-term viability of SPLS' business after better-than-expected Q3 results with strength/acceleration in delivery and a 25% increase in FCF. Starboard, which now has stakes of 6/9.9% in SPLS/ODP (from 0/9.1%), has been involved in the office retail space since 2012 when it took a position in ODP and was a major factor in driving the merger with OMX. According to press reports, Starboard is now seeking an ODP-SPLS merger. We see the high level of complexity of essentially merging three companies as the biggest risk. We do not believe regulators would block a potential deal given prior approval of the ODP-OMX merger, many years of difficult industry conditions and an industry that is still very fragmented.”
Office Depot closed on Thursday at $7.54.
Latest Ratings for ODP
| Nov 2014 | Goldman Sachs | Downgrades | Buy | Neutral |
| Nov 2014 | KeyBanc | Maintains | Buy | |
| Nov 2014 | Deutsche Bank | Maintains | Hold |
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