OfficeMax, Office Depot in Merger Talks (OMX, ODP)
According to the Wall Street Journal, sources familiar with the matter said that OfficeMax Inc. (NYSE: OMX) and Office Depot Inc. (NYSE: ODP) are closing in on a merger deal—a move which would allow the office supplies chains to fight with more force against strong competitors such as Staples Inc. (NASDAQ: SPLS) and Amazon.com Inc. (NASDAQ: AMZN).
The sources added that announcement of the merger deal, which is expected to be stock-for- stock transaction, might come as soon as this week. However, many issues such as what percentage of a merged group shareholder of either company would hold following the deal are still unclear.
When asked to comment over the deal, a spokeswoman from OfficeMax and spokesman from Office Depot said that it was their companies’ policy not to comment on speculation or rumors.
If the deal does materialize then it would bring together two companies that have felt tremendous pinch on their both top-line and bottom-line due to flagging sales, weakness in the macroeconomic environment and rising competition from online marketplaces such as Amazon.com. It is believed that a merger deal would create cost synergies for both companies. For instance; both companies have number stores located in the same market competing against each other. A merger would not only help slashing costs by reducing number of stores and workforce but also give more bargaining power while dealing with suppliers.
Both OfficeMax and Office Depot have significant presences geographical presence. While Office Depot, which is based in Boca Raton, Florida, operates 1,675 stores globally and has annual sales of about $11.5 billion with 39,000 employees, Naperville, Ill based OfficeMax has nearly 900 stores in the U.S. and Mexico and has almost $7 billion in annual sales with a workforce of 29,000.
Back in 1997, an a merger attempt between Staples and Office Depot had to face a hurdle by the U.S. Federal Trade Commission as it was feared that deal would kill competition and result in higher prices. However, during the course of the time, increase in competition from both internet marketplaces and discount retail chains such as Costco Wholesale Corp and Wal-Mart Inc have lowered office supplies chains’ traction in the stationery industry.
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Post Written By: Ed Liston
Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications. He is widely quoted in various financial publications on the Internet. When Ed is not writing about stocks, investing in stocks, talking about stocks, or otherwise doing something stock related, he likes to go sailing and fishing in his yacht.
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