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 behomoth 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.
“This combination will create a stronger, more global, efficient competitor able to meet the growing challenges of our rapidly changing industry,” OfficeMax CEO Ravi Saligram said in a call with analysts.
The merger must be approved by shareholders and by federal anti-trust regulators. The deal is scheduled to close by the end of the year.
Wednesday's announcement answered the looming question of whether the No. 2 and No. 3 office supplies retailers would combine. But other mysteries remain. The CEO of the combined company has yet to be named. The location of the new company's headquarters and its name are mysteries to be solved only after a new CEO is named.
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. They expanded rapidly in the United States 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. In addition, office suppliers were slow to bounce back from the recession, as consumers and small businesses alike cut back on ordering office products.
Over the years, the companies have closed stores, slashed costs, and streamlined operations to offset stagnant sales. But the industry was still seen as too bulky.
Office Depot, which has 1,675 stores worldwide, reported a loss of $17.5 million, or 6 cents per share for the three months ended Dec. 29.
OfficeMax, which has 900 stores in the United States, reported a loss of $33.9 million, or 39 cents per share.