Jun 24, 2025 activistcompany

Kanen Wealth Management/ Philotimo Fund opines ODP Corp (ODP) could trade more than 8x its current trading price

Key Summary: On January 25, 2021, ODP entered a Cooperation Agreement with HG Vora (9.5%), appointing Marcus B. Dunlop to the Board. On March 25, Kanen Wealth Management (1.15%) criticized the Board for poor results and inaction, arguing ODP was deeply undervalued with strong FCF, a robust B2B business, and major strategic optionality. HG Vora renewed its agreement with the company on December 30, 2021.

M.Cap: $2.2 billion | The ODP Corporation provides business services and supplies, products, and technology solutions for small, medium, and enterprise businesses.

On January 25, 2021, the company entered into a Cooperation Agreement with HG Vora Capital Management (9.5%) and pursuant to it, the Board increased the size of the Board to ten directors and appointed Marcus B. Dunlop (the HG Vora Designee) to the Board to fill the resulting vacancy effective as of January 26, 2021 with a term expiring at the 2021 annual meeting of shareholders of the Company. Source

On March 25, 2021, Kanen Wealth Management/ Philotimo Fund (1.15%) sent a letter to the Board expressing its disappointment with the company's recent financial results and the Board's failure to take actions necessary to improve the situation.

Valuation Insight

The Company generated $417M in FCF in 2020 (a pandemic stricken year). This means ODP should have generated $23.55/share in Free Cash Flow in 2020. With its net cash balance sheet; strong FCF generation; quality BSD distribution business (normalized); large opportunity for digital procurement marketplace platform; potential to capture a highly synergistic merger or outright sale of retail segment; and a Company that cares about creating value for shareholders…ODP should be trading for at least 12x FCF.

12 x $23.55/share = $282.60 per share, or more than 8x ODP’s current trading price ($40).

ODP has consistently traded at a criminally low valuation. The market is saying ODP is a loser and will continue to destroy value; the market also does not understand and gives little to no credit to (i) the strength of ODPs B2B distribution business, (ii) the new digital procurement platform/marketplace opportunity, (iii) the opportunity that ODP could harvest $700M-$1B+ for its retail/consumer business and become a pure play distributor/platformco, and (iv) The significant overcapitalization/strength of ODP’s balance sheet.

On December 30, 2021, HG Vora Capital Management (9.7%) and the company entered into a First Amendment to the Agreement

More like this

Daniel S. Farb nominated Board Candidates to Artelo Biosciences, Inc (ARTL)

Khrom Capital urges Acadia Healthcare Company, Inc (ACHC) for Strategic Review and Potential Sale

Alden Global increased its stake after reaching Cooperation Agreement with Freds Inc. (FRED)

Alden Global reduced its stake below 5% in Pier 1 Imports (PIR)

JCP Investment Management Sees Earnings Growth Potential, Plans Engagement with Board of Denny's Corporation (DENN)

Lakeview Investment Group reaches agreement with TESSCO