Briefing: Staples and Office Depot
Framingham-based Staples Inc. announced Feb. 3 that it was purchasing its chief rival, Office Depot, for $6.3 billion. The deal will merge the nation’s top remaining office supply chains, leading to cost savings of $1 billion annually within three years, according to Staples. (For more, read our editorial.)
What will the new Staples look like?
The deal would grow Staples from $22.7 billion in annual revenue to $39 billion while the numbers of stores and distribution facilities double to 4,020 and 243, respectively. The company’s international presence would grow overall, but at $7.4 billion will make up about the same percentage of the business as it does today.
What's the timetable for the merger?
It’s expected to be completed by the end of the year, according to Staples. The deal is subject to the approval of regulators and shareholders of Office Depot, which is based in Boca Raton, Fla.
What led to the deal?
Talks between the two companies began in September, according to Staples. The company had been under pressure to merge with its rival from activist investor Starboard Value, which has a stake in both firms. In a letter to Staples CEO Ron Sargent, Starboard Value said a merger could help Staples compete against larger retailers and online competitors.
How will this help the company?
Sargent, who will remain CEO, said the projected savings “will dramatically accelerate our strategic reinvention which is focused on driving growth in our delivery businesses and in categories beyond office supplies.” In recent years, Staples has been gradually reducing its retail store space and focusing more on online sales.
Are there any skeptics?
Yes. Even if the deal passes antitrust scrutiny, it still spells bad news for smaller, regional competitors, said retail analyst Frank Riso, which would mean less competition overall and a worse deal for consumers.
Others in the industry question the long-term viability of the Staples model. One, Doug Stephens of Retail Prophet, a retail consultancy in Toronto, told CBC News that an increasingly paperless work environment and the addition of online avenues for supplies could spell the end of the brick-and-mortar supply store.
He also felt Staples would likely move toward more online sales, which would result in store closing and layoffs.
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