May 2 A shareholder in OfficeMax Inc sued the directors of the company on Thursday, seeking to block its acquisition by larger rival Office Depot Inc, calling the proposed $1.2 billion all-stock deal "grossly inadequate".
The proposed merger which seeks to help the two suppliers of office goods slash costs amid fierce competition from online competitors, has also been criticized for lacking details and comes at a time when Office Depot is under fire from an activist investor.
Under the terms of the proposed agreement, announced on Feb. 20, OfficeMax shareholders would receive 2.69 Office Depot common shares for each OfficeMax share they own.
"OfficeMax, if properly exposed to the market for corporate control, would bring a price materially in excess of the amount offered in the proposed transaction," the complaint filed by investor Eric Hollander said.
OfficeMax Chairman Rakesh Gangwal and its CEO Ravichandra Saligram were among the directors named as individual defendants, accused of breaching their fiduciary duties to the company's shareholders. The complaint also accuses Office Depot of aiding in their breach, and OfficeMax of providing incomplete information to shareholders.
Nicole Miller, a spokeswoman for OfficeMax, did not immediately respond to an emailed request for comment. Brian Levine, a spokesman for Office Depot, declined to comment.
Office Depot's largest shareholder Starboard Value LP is seeking to unseat certain board members, saying the current board lacks retail experience, and last month it said it would be going directly to shareholders in the absence of a scheduled shareholder's meeting.
Office Depot said this week that it would hold a special meeting with shareholders after the staff of the U.S. Securities and Exchange Commission finishes reviewing documents relating to its merger with OfficeMax.
The case is Hollander v. OfficeMax Inc et al, U.S. District Court, Northern District of Illinois, No. 13-3330.