A Delaware court has cleared the way for dissident investor Alan Levan to nominate two directors to Office Depot's board, although four separate proxy advisory firms are recommending that shareholders reject the slate.
The office supply chain had tried to block Levan's candidates by citing a company bylaw requiring nominating parties to own shares at the time advanced notice was required to be given.
Levan, principal of real estate and investment firm The Woodbridge Group, sued to have the bylaw deemed inapplicable to his proxy fight, and The Delaware Court of Chancery, here, granted the motion.
"We are disappointed by the court's reading of Office Depot's notice of meeting to permit Levan's nominees to stand for election," the retailer said in a statement. "Regardless of the court's ruling that Levan's dissident nominees may stand for election, we continue to believe that our stockholders will be best served by rejecting Levan and his nominees. In our opinion, Levan's nominees are unqualified and would add nothing to our board."
Office Depot said it is currently reviewing its options in the wake of the ruling. The election is slated for April 23 at the company's annual meeting.
Meanwhile, four different proxy voting advisory services have independently recommended that Office Depot's shareholders reject Levan's nominees. One of the firms, Egan-Jones Proxy Services, found that the candidates' plans "lack sufficient detail," while Institutional Shareholder Services (ISS) cited their lack of qualifications, their failure to prove that they would be better able to effect positive changes at Office Depot than current management, and the poor performance of Levan's companies.
"We appreciate the thorough analysis that these firms have undertaken and are pleased with their recommendation that our stockholders reject Alan Levan and his dissident nominees," said Office Depot CEO Steve Odland. "[Our] board and management are disappointed with the company's recent performance and we share our stockholders' frustration. However, the entire boards as well as management are fully dedicated to enhancing Office Depot's operating performance and we are implementing a strong strategic plan designed to increase value for all of our stockholders."
Separately, Standard & Poor's Ratings Services (S&P) has lowered Office Depot's credit rating from BB+ to BBB-. Odland expressed disappointment over the decision, but said the chain will continue to move forward with its turnaround plan. "Our management team is committed to taking every step necessary to improve the company's performance," he stated. "We have a strong turnaround plan in place and we are focused on executing that plan."