Office Depot joins OfficeMax in $1.2B deal to stay competitive

2/21/2013
BLADE NEWS SERVICES
Boca Raton-based Office Depot and Naperville, Ill.-based OfficeMax officially announced Wednesday that they are merging in an effort to compete with the Staples chain, which leads the office-supply store sector. The merger must still be approved by shareholders and federal antitrust regulators.
Boca Raton-based Office Depot and Naperville, Ill.-based OfficeMax officially announced Wednesday that they are merging in an effort to compete with the Staples chain, which leads the office-supply store sector. The merger must still be approved by shareholders and federal antitrust regulators.

BOCA RATON, Fla. — Office Depot and OfficeMax on Wednesday announced their long-rumored merger, a marriage of the No. 2 and No. 3 office-supply stores, in an effort to compete against industry behemoth Staples Inc.

Sales at Boca Raton-based Office Depot Inc. and Naperville, Ill.-based OfficeMax have been shrinking. Analysts agree that the retailers are saddled with too many stores, too many employees, and too much competition.

While the companies billed the $1.2 billion deal as a “merger of equals,” OfficeMax shareholders will receive shares of Office Depot, and investors clearly viewed the deal as an acquisition of OfficeMax by Office Depot.

Staples holds a 35 percent share of the retail office-supply market, followed by Office Depot at 26.1 percent and OfficeMax at 15.6 percent.

“Combining our two companies will enhance our ability to serve customers around the world, offer new opportunities for our employees, make us a more attractive partner to our vendors, and increase stockholder value,” Office Depot Chairman and Chief Executive Neil Austrian said in a statement.

The merger must be approved by shareholders and by federal antitrust regulators. The deal is scheduled to close by the end of the year.

It’s way too early to know what will happen to individual stores. There are six Office Max locations and two Office Depot stores in northwest Ohio. The only two that are near each other are on Monroe Street in the Franklin Park area.

Office Depot and OfficeMax, along with Staples, were all founded in the 1980s and helped pioneer the big-box boom in the 1990s.

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 a decrease in sales.

Office Depot, which has 1,675 stores worldwide, reported a loss of $17.5 million, or 6 cents per share, for the three months which ended Dec. 29.

OfficeMax, which has 900 stores in the United States, reported a loss of $33.9 million, or 39 cents per share.