NEW YORK -- Office Depot and OfficeMax are being collated.
The retailers said Wednesday that they have agreed to combine in an all-stock deal worth about $1.2 billion that would transform the office-supply retail sector by helping the No. 2 and No. 3 chains compete against industry behemoth Staples.The merger marks the first move toward consolidation in the office supplies sector and reflects the changing retail landscape as "big box" stores have become outmoded as more people shop online."This combination will create a stronger, more global, efficient competitor able to meet the growing challenges of our rapidly changing industry," said OfficeMax CEO Ravi Saligram in a call with analysts.Still, doubts remain about whether the combination, which has been mulled over in the industry for years, is enough to offset growing competition and a changing retail landscape.Liang Feng, a Morningstar analyst, said the companies will have a lot of obstacles to overcome."The industry will face longer term structural headwinds with competitors like Amazon and Costco gaining ground and the decline in demand for secular office products like paper, pens and ink," he said.Office Depot and OfficeMax, along with bigger rival Staples, were all founded in the 1980s and helped pioneer the big-box boom in the 1990s. They expanded rapidly in the U.S. throughout the decade.But the rise in competition from web retailers like Amazon.com and discounters like Costco and Wal-Mart has been tough on the sector, leading to decreased sales.The Wall Street Journal first reported the possibility of a deal between Office Depot and OfficeMax on President's Day on Monday, when markets were closed. That sent stock across the sector soaring on Tuesday when markets reopened.In the deal, Office Depot, based in Boca Raton, Fla., and Naperville, Ill.-based OfficeMax said holders of OfficeMax shares will receive 2.69 shares of Office Depot for every OfficeMax share they own.That's equal to about $13.50 per share, based on Office Depot's $5.02 per share closing price Tuesday, giving the deal a total value of about $1.2 billion. The combined company's name, CEO and corporate headquarters are yet to be determined; both companies' CEOs are being considered for the top role. Both companies would have equal representation on the combined entity's board. The deal, which is expected to be complete by the end of the calendar year, requires shareholder and regulatory approvals.Have more to add? News tip? Tell us
