Office Depot & Staples: A Marriage Made By Starboard?

Shares of Staples, Inc. SPLS and Office Depot Inc ODP had a spectacular run on Thursday following the revelation that activist investors Starboard Value LP has initiated a stake in Staples and increased its existing stake in Office Depot. However, the run-up in both stocks is not only because of the new investor, but also on the rumors regarding what the investor plans to do with both the companies.

CNBC's David Faber recently discussed these new positions by Starboard and what message this sends to the Market.

“Staples is up sharply this morning after activist investor Starboard value disclosed a 5.1 percent stake in the office supply retailer. Starboard also raising its stake in Office Depot to what is about 10 percent, this is a 13-D filing, actually I believe it’s close to 6 percent now at Starboard. It is both through stock itself and through options, haven’t seen using options that often,” Faber said.

“More importantly while they may say nothing in the 13-D, the message that the markets are hearing most probably appropriately is we want you two to potentially think about getting together with Office Depot. Remember, Starboard was the engine, if you will, behind Office Depot and Office Max getting together."

Faber highlighted that the FTC  is not likely to put an obstacle if this deal happens, quoting what the FTC said while approving the Office Depot and Office Max merger last year: "The commission’s investigation show that today’s market for the sale of consumable office supplies is broader, due mainly to 2 significant developments. One is that customers now look beyond office supply superstores for office supply products & rely more heavily on non-OSS brick and mortar retailers… The other is explosive growth of online commerce, which has had a major impact on this market."