US Office Products

By Mary Barth, Kipp de Veer, Michael Finkelstein, John Hecht, David Luse, Steven Rogers, Rache Winokurl
1999 | Case No. A179
Within 3 years, US Office Products’ founder had grown the company through acquisitions to one of the largest global concerns in the office supply market. The company used a hub and spokes acquisition strategy that would allow for earnings accretion and growth in market equity capitalization, and it accounted for acquisitions using the pooling-ofinterests accounting method for business combinations. In 1997, the founder felt the stock of USOP was undervalued and decided on a maior restructuring that would involve significant stock repurchase, a tax-free spin-off of 4 unrelated businesses, and an equity infusion from a private investment firm. Although the founder felt the restructunng would help increase efficiency and shareholder value, the transaction had implications that could threaten USOP’s acquisition strategy. The restructuring would force the company to change its merger accounting for 13 previous transactions and would prohibit it from using pooling-of-interests accounting for the next two years. The change in financial reporting could seriously depress the stock price. The case details the effects on shareholder value for this kind of company restructure and it provides opportunity for detailed analysis of accounting methods for companies in the rapid acquisition and growth mode.
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