What happened?
Office Depot (ODP -1.24%) is retreating from the Chinese market. The company announced that it is selling its operations in the country to Shanghai M&G COLIPU Office Supplies, a local peer. Neither the terms nor the price of the deal was made public.
The move follows similar sell-offs across the Pacific Ocean. In April, Office Depot announced that it had reached deals to sell its businesses in South Korea, Australia, and New Zealand. The former deal was made with investment firm Excelsior Capital Asia, while the partner in the Australia/New Zealand sale is Beverly Hills-based private equity firm Platinum Equity. As with the China sale, Office Depot did not release the terms and prices of those deals.
The China sale is subject to approval from the relevant regulatory bodies. Office Depot believes it will close within the next few months.
IMAGE SOURCE: OFFICE DEPOT.
Does it matter?
Everyone knew these sales were coming -- last year, Office Depot said it would divest its remaining international assets to focus on the North American market. Without much detail on the structure and scope of the recent deals, we can't ascertain how advantageous (or not) they were for the company.
Regardless, Office Depot is still clearly reeling from the failure of its planned merger with rival Staples (SPLS), after a questionable (in my opinion, anyway) ruling last year from a federal judge striking down the deal. Many investor hopes were pinned on the Office Depot/Staples marriage, which is understandable -- the combined company could have easily consolidated operations and taken advantage of economies of scale.
So for Office Depot, these foreign sales are a retreat and a retrenchment. As such, they should be considered positive for the company and its stock. I wouldn't rush out to buy the latter, though. The company's retrenchment is going to take a while, and there's little guarantee it can be successful, given that the office supplies segment has gotten more competitive over the years.
