OFFICE DEPOT SUED FOR NOT HOLDING ANNUAL MEETING

Reuters is reporting that Office Depot Inc (ODP) investor Starboard Value LP has sued the second-largest U.S. office supply retailer for not holding an annual shareholder meeting to elect directors.

Starboard Value filed the complaint with the Court of Chancery in Delaware, where Office Depot is incorporated.  The complaint states that the company had not held an annual shareholder meeting for 13 months.

Starboard has nominated six people for the 10-member Office Depot board. They cited the lack of experience among current board members and stressed the need to reconstitute the board whether or not its proposed merger with rival OfficeMax Inc (OMX) goes through.

Office Depot announced in February plans to buy OfficeMax in a deal worth $937.2 million. They have not yet decided on the combined entity's name, headquarters or CEO.  The companies are awaiting regulatory approval and will both hold special shareholder meetings on July 10 to seek investor approval.

"The proposed merger provides no basis for the company to deprive stockholders of their right to meet annually to elect directors," Starboard said in the complaint.

Starboard said it was forced to take the latest action as it did not expect directors to be elected at the special meeting.  Starboard said in its most recent regulatory filing that it held about 42 million shares of Office Depot, or about 15 percent of the company's stock.  In addition to Office Depot, Starboard reported a position of almost 8 million shares in Compuware (CPWR), 12.5 million shares of Integrated Device Technology (IDTI), 5.1 million shares of Calgon (CCC), and 7.3 million shares Wausau Paper (WPP).

This lawsuit could potentially drive down Office Depot’s stock price which is currently trading around $4.28.  While that could be a good thing for investors looking to initiate new positions it might not be the best thing for the company considering the stock-for-stock merger deal with OfficeMax.