Staples Competitors To Merge

Two publicly traded office supplies retailers that hold the number two and three spots in the market behind Framingham-based Staples Inc. have agreed to combine in an all-stock merger, they announced this morning.

OfficeMax Inc. and Office Depot Inc. said they are combining to create a stronger and more efficient company that can compete in a rapidly changing industry. The merger is expected to create synergies ranging from $400 million to $600 million, which could be realized through closing stores and other measures.

"In the past decade, with the growth of the Internet, our industry has changed dramatically," said Neil Austrian, chairman and CEO of Office Depot. "We are confident that this merger of equals represents a new beginning for our two companies and will allow us to build a more competitive enterprise for the long term."

OfficeMax shareholders would receive 2.69 shares of Office Depot shares for every share of OfficeMax they own, under the agreement.

Together, the two companies had revenue of $18 billion in 2012. Staples had just over $25 billion in revenue in its fiscal year ending in January.

Last fall, Staples announced it would invest more in its online businesses and restructure operations around the world in an effort to cut about $250 million in costs by the end of its 2015 fiscal year. It said it was also aiming to reduce its retail square footage in North American stores by about 15 percent and close about 15 stores by the end of 2012.

In November, the company reported a 2-percent drop in revenue for its 2012 third quarter, as well as a net loss of $569 million. Its full-year results for 2012 are scheduled to be released March 6.

Shares of Staples' stock gained close to 13 percent Tuesday on rumors of a merger between Office Depot and Office Max. But they fell back 7 percent today to close at $13.60 a share.

However, shares in Office Depot plunged 17 percent to $4.86 a share, while shares in Office Max dropped 7 percent to $12.07.

With a market capitalization of $1.4 billion, Office Depot is slightly larger than OfficeMax. Under the terms of the deal, the combined company's board of directors would have equal representation from each company, and a committee would conduct a search for a CEO. Both Austrian and Ravi Saligram, who heads OfficeMax, would be considered for the position. The combined company's name and corporate headquarters would be determined after a CEO is appointed.

In Central Massachusetts, each chain has only one store. Office Depot has a retail location in Framingham while Office Max has a store in Marlborough.

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