UPDATE: Bank of America Reiterates Buy Rating, Raises PT on Office Depot on Possible Acquisition by SPLS

In a report published Friday, Bank of America analyst Denise Chai reiterated a Buy rating on

, 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.