A New York-based major shareholder in OfficeMax has urged the company to sell-off its Australian and New Zealand divisions so that it can return more cash to investors.
In a letter to OfficeMax CEO Ravi Saligram, Neuberger Berman managing director Benjamin Nahum said that OfficeMax should have a more investor-centric strategy that included paying out a dividend and a share buyback programme.
Nahum's Neuberger Berman investment firm, which has offices in Australia, owns more than 4,300,000 of OfficeMax's shares (around five per cent), including 700,000 shares (worth around US$3.3 million) owned by Nahum himself.
One way of returning cash to shareholders, Nahum stated, was by selling off the "non-core" assets in Australia and New Zealand and using the proceeds for share repurchases or dividends.
Nahum was also concerned that OfficeMax might use cash to make a "transformational acquisition" and is seeking more powers for shareholders to be able to veto such a deal.
Nahum’s letter to Saligram said, in part: "Over the last eighteen months, you have had ample time to review all aspects of the company’s operations and put into place a thoughtful plan to make OfficeMax more profitable. However, the anaemic recovery in employment as well as secular issues around the demand for office products continue to pose significant hurdles in your pursuit of sustainable earnings and margin growth. As a result, OfficeMax’s share price, when adjusted for its net cash position, now sells at the lowest multiple of earnings and cash flow in its history and at a valuation well below that of its competition on every financial metric.
“While the company’s most recent quarterly earnings performance was encouraging, it did little to sway the investment community’s skeptical view of the long term merit of investing in OfficeMax. In a highly competitive and slow growth industry, a sound operating strategy is necessary but by itself, insufficient to attract investors. In our view, a company in OfficeMax’s position needs to also outline how it plans to allocate capital in a mature and difficult business climate.”
