Staples, Inc. shareholders approved a plan to buy back shares of its Staples.com tracking stock from executives and large investors who exclusively own the shares for about $7 per share, more than twice the $3.25 a share many had paid for them.
The vote Monday came more than a week after a Delaware judge approved the deal as part of a settlement in a lawsuit brought by shareholders who claimed the buyback plan – hatched in a company retrenchment amid the economic downturn – was a sweetheart deal for executives.
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Venture capitalists, executives and directors had paid $3.25 for shares of Staples.com in 1999. The Framingham, Mass.-based company had initially planned to spin off its Internet division.
In April, Staples said its 13 directors would forgo making a profit on the buyback to avoid even the appearance of a conflict of interest.
Staples chairman and CEO Thomas Stemberg said the board agreed to the plan “so that there would be absolutely no doubt that they were doing the right things for the right reasons.”
He defended the right of others to take advantage of the buyback, including company executives.
“Our executives did a good job, they built a great business … and they deserve to be rewarded for that,” he said.
The plan approved by 85 percent of Staples’ shareholders will swap 0.4396 shares of Staples stock for each share of the Staples.com tracking stock. That values Staples.com shares at $6.96 per share, based on Staples closing price Monday of $15.38 on the Nasdaq Stock Market.
Some thought the deal was too lucrative.
“I question why such a return is being given back to management,” said Tom Balog, an organizer for the New England Regional Council of Carpenters. “Some people are going to make a lot of money off that.”
Stemberg said the buyback will allow the company to integrate Staples.com with its catalog business and its retail stores.
Stemberg said the company is reacting to the cooling economy by taking a more conservative approach to the number of stores it plans to open this year.
Instead of expanding aggressively into new markets, the company will also focus more on its existing markets, he said.
