Office Depot Inc. (NYSE: ODP) has filed a NIS 51 million lawsuit with an English court against Hamashbir 365 Holdings Ltd. (TASE:MSAH), which owns the local franchise, Office Depot Israel Ltd., for failing to pay royalties under the terms of its license.
The lawsuit is the latest problem to plague Office Depot Israel, which is losing money on falling sales. Hamashbir has filed a motion to annul its acquisition of the franchise, and sources believe that the motion was Office Depot Inc.'s excuse to sue for unpaid royalties.
Office Depot Israel has 55 stores nationwide, after closing four stores. It has reached an agreement to close its store in Hadera and to close or change the lease terms of three stores in malls owned by Azrieli Group Ltd. (TASE: AZRG). Office Depot Israel general manager Tzahi Fishbein says that the company has also reached agreements with mall owners Gazit-Globe Ltd. (NYSE: GZT; TASE: GLOB), Big Shopping Centers (2004) Ltd. (TASE:BIG), and Melisron Ltd. (TASE: MLSR) to reduce stores' floor space in their malls.
Office Depot Israel is still losing money heavily, and Hamashbir will likely report a negative balance sheet for 2012.
"Globes": When will the losses stop?
Fishbein: "According to our plans, by the end of 2013. The losses will narrow, and we have no plans to make a profit next year."
Is the fall in sales continuing?
"No. there is no fall now. There's a limit to how low you can fall."
Fishbein once sold Office Depot Israel back to Office Depot Inc., and he is now in talks to acquire the franchise from Hamashbir with a group of investors. "The sale process is in a very advanced stage in terms of the potential investors. I'm in advanced talks with a group of very interested investors, and if we close a deal, it will be a favorable surprise."
Published by Globes [online], Israel business news - www.globes-online.com - on October 10, 2012
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