UPDATE 1-Office Depot's top holder asks it to revoke poison pill

Fri Nov 16, 2012 3:14pm EST

Nov 16 (Reuters) - Activist hedge fund Starboard Value asked Office Depot Inc to immediately revoke its "poison pill" provision, claiming it limits the influence of shareholders.

In September, Starboard said it took a 13.3 percent stake in Office Depot, the No. 2 U.S. office supply retailer, making it the biggest shareholder in the company. On Friday, the hedge fund said it owned a 14.8 percent stake.

"We believe the implementation of the poison pill, with a threshold just above our current ownership, is designed specifically to entrench the current board," Starboard said in a letter to the board.

Shares of Office Depot fell 19 cents, or 6.4 percent, to $2.77 in afternoon trading on the New York Stock Exchange.

"The board's adoption of the shareholder rights plan was carefully considered and is clearly in the best interests of shareholders," said Office Depot spokesman Brian Levine.

Office Depot has been facing tough competition from other office products suppliers as well as mass merchants and drugstores.

Sales at office supply retailers have suffered as corporate customers and other shoppers cut back on discretionary spending in the weak global economy.

Same-store sales at Office Depot's North American stores fell 4 percent in the third quarter.

Meanwhile, shares of rival OfficeMax Inc soared on Friday on expectations the office supply chain will benefit from an initial public offering of wood products maker Boise Cascade LLC, in which it holds a 20.4 percent stake.

Shares of OfficeMax were up 15.3 percent at $9.49 late in the day after rising as high as $10.62.

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