Office Depot is packing up its corporate bags and shipping out of the Sunshine State, but not before scoring millions in state and local taxpayer incentives.
The Boca Raton business giant announced this past Wednesday that Staples Inc., its chief office supplies competitor, is buying the Fortune 300 company and moving its South Florida corporate headquarters out of the state.
It’s unclear exactly what the future holds for its 2,000-plus employees. Florida Watchdog contacted Staples but did not receive a return response.
Just 14 months ago, Office Depot was awarded a state and local government incentive package worth $5 million — about $3 million from the state that has not been paid out, $1.5 million from the city of Boca Raton and $500,000 from Palm Beach County.
All it had to do was stay put in its existing corporate facility.
Months later, however, the company was ripe for acquisition.
“Staples began discussions to acquire Office Depot in (September) 2014,” an Office Depot statement says.
Now, the company is all but gone. Only shareholder approval of Staples’s generous offer and an antitrust regulatory sign-off stand in the way of finalizing the deal. Office Depot says it should be completed before the end of the year.
The sale is great news for Office Depot shareholders who are set to receive a 44-percent return on the stock price (as of Wednesday). It’s even better for Office Depot CEO Roland Smith, who after little more than a year on the job will pocket a cool $9 million, according to Securities and Exchange Commission filings.
Ron Sargent, CEO of the Framingham, Mass.-based Staples, called the deal a “transformational acquisition” that will create a combined revenue stream of $39 billion.
Florida taxpayers, Office Deport-based Boca Raton employees and the local economy might not share his excitement.
In 2006, Office Depot scored a separate tax incentive package worth $4.9 million, $3 million of which it gets to keep.
Christopher Koopman, a research fellow at the Mercatus Center at George Mason University, said tax incentives are often short-sighted arrangements that leave taxpayers on the hook.
“Politicians grab headlines and give the appearance that they’re creating jobs, and businesses benefit because they’re getting the incentives,” Koopman told Florida Watchdog.
“Ultimately, it’s the taxpayers who lose because they pay for the incentives in the short-term and they pay for any consequences in long-term,” he said.
At the time Florida officials pledged the last round of incentives, Office Depot had merged with its rival office supplies competitor, Office Max. The sweetheart deals went a long way to keep Office Depot’s corporate headquarters in Florida, according to a company statement.
Florida, one of the lowest-taxed business-friendly states in the country was apparently competing with Illinois to land Office Depot’s corporate headquarters after the merger. Office Max was headquartered in Naperville, Ill.
It was the Sunshine State’s business “climate” that won the day, Enterprise Florida CEO Gray Swoope said in December 2013.
“Thanks to the business-friendly climate Governor (Rick) Scott created and our effective economic development model, a Fortune 300 company like Office Depot knows they can be successful in our state,” Swoope said. He did not mention the incentives at the time.
To be clear, all Office Depot did was stay in its existing 625,000-square-foot Boca Raton corporate campus rather than move to the corporate home of Office Max in Illinois.
An Illinois legislator told Watchdog.org at the time, “Government should not be picking winners and losers.”
“People are quick to blame the companies,” Koopman said. “It’s the politicians who are afraid that some other state is going to poach their businesses.”
Sometimes, it happens anyway.