Office Depot agrees to buy OfficeMax in stock deal - Dallas News | myFOXdfw.com

Office Depot agrees to buy OfficeMax in stock deal

Posted: Updated:

NEW YORK (AP) -- Office Depot Inc. said Wednesday it will buy OfficeMax in an all-stock deal that would transform office-supply retail sector.

Boca Raton, Fla.-based Office Depot Inc. and Naperville, Ill.-based OfficeMax said holders of OfficeMax shares will receive 2.69 shares of Office Depot for every OfficeMax share they own.

That's equal to about $13.50 per share, based on Office Depot's $5.02 per share closing price Tuesday, giving the deal a total value of about $1.2 billion. OfficeMax had about 86.7 million shares outstanding as of Oct. 26, according to SEC filings. It is a 3.8 percent premium to OfficeMax's closing price of $13 on Tuesday and a 26 percent premium to OfficeMax's closing price on Friday, before word of negotiations leaked out.

The combined company's name, marketing brands and corporate headquarters will be determined after the company names a CEO.

There was some confusion about the deal Wednesday morning when Office Depot reported terms of the deal in a release on its Web site early Wednesday and then removed it, before restoring it after the market opened.

But Morningstar analyst Liang Feng said he did not expect the premature release would damage to the companies.

"I don't think it will cause that much of headache for the companies unless deal doesn't go through," he said.

The move would combine the No. 2 and No. 3 office supply retailer and lead to consolidation in an industry that analysts have said for years has too many stores. It reflects the changing retail landscape as "big box" stores become outmoded and more people shop online.

Office Depot and OfficeMax, along with bigger rival Staples Inc., were all founded in the mid- to late 1980s and helped pioneer the big-box boom in the 1990s, expanding rapidly in the U.S.

But the rise of Web retailers like Amazon.com and more expansion into office supply categories by discounters like Costco and Wal-Mart has been tough on the sector. In addition, office suppliers were slow to bounce back from the recession, as consumers and small businesses alike cut back on ordering office products.

The companies have closed stores, slashed costs and streamlined operations to offset stagnant sales. Rumors about possible consolidation have swirled around the sector for years but nothing ever materialized.

The Wall Street Journal reported the possibility of the deal on Monday, sending stock across the sector soaring on Tuesday.

OfficeMax said the move is expected to result in $400 million to $600 million in cost savings by the third year of the deal. Both companies will have equal representation on the combined entity's board.

The deal is expected to be complete by the end of the calendar year.

Analysts say that if the deal closes it would likely benefit the largest office supply player Staples Inc. since the combined entity will likely close stores, leading to market share opportunities for Staples.

"We think a potential merger would result in a significant number of store closings, and thus an improvement in the overall economics of the office supply retail business," said S&P analyst Ian Gordon on Tuesday. "This area has been under pressure from a weak business spending environment and competition from non-traditional channels like Amazon in our view."

The office supply sector is worth about $21.2 billion, according to research firm IBISWorld Inc. in Santa Monica, Calif. Of that, Staples holds a 35 percent market share, Office Depot 26.1 and Office Max 15.6.

Staples is much larger than its smaller rivals, with 2,295 stores worldwide and a market capitalization of $9.56 billion. In contrast Office Depot's market capitalization is $1.43 billion and OfficeMax is $1.13 billion. Market capitalization is the market value of a company's outstanding shares and can be used to measure a company's size.

The deal still has to go through shareholder and regulatory approvals, and office supply mergers have been questioned by regulators in the past. In 1997, Staples Inc. attempted to buy Office Depot but the deal was nixed by the Federal Trade Commission due to concerns the combined company would have too much of a competitive advantage in the marketplace.

Office Depot, which also reported quarterly results that missed expectations on Wednesday, saw shares fall 8 cents to $4.94 in morning trading. OfficeMax shares rose $1.18, or 9 percent, to $14.18.

Staples shares fell 29 cents, or 2 percent to $14.36.

  • Your MoneyMore>>

  • OKCupid, Facebook not alone in studying consumers

    OKCupid, Facebook not alone in studying consumers

    Tuesday, July 29 2014 4:51 PM EDT2014-07-29 20:51:44 GMT
    Think you're in control? Think again. This week, OKCupid became the latest company to admit that it has manipulated customer data to see how users of its dating service would react to one another. The New York-based Internet company's revelation follows news earlier this month that Facebook let researchers change news feeds to see how it would affect users' moods.
    Think you're in control? Think again. This week, OKCupid became the latest company to admit that it has manipulated customer data to see how users of its dating service would react to one another. The New York-based Internet company's revelation follows news earlier this month that Facebook let researchers change news feeds to see how it would affect users' moods.
  • New York's microbrew industry growing

    New York's microbrew industry growing

    Monday, July 28 2014 8:39 PM EDT2014-07-29 00:39:52 GMT
    Local and small beer brewing companies have something to toast. The Brewers Association says microbrew sales grew in the first half of this year; up 18 percent over the same period last year. This comes at a time when overall domestic beer consumption is flat.Ethan Long, one of the owners of the Rockaway Brewing Company in Long Island City, started brewing beer two years ago.
    Local and small beer brewing companies have something to toast. The Brewers Association says microbrew sales grew in the first half of this year; up 18 percent over the same period last year. This comes at a time when overall domestic beer consumption is flat.Ethan Long, one of the owners of the Rockaway Brewing Company in Long Island City, started brewing beer two years ago.
  • Maryland casino to interview workers from closing Atlantic City casinos

    Md. casino eyes workers from closing Atlantic City casinos

    Friday, July 25 2014 4:32 PM EDT2014-07-25 20:32:23 GMT
    AP photoAP photo
    A Maryland casino is looking to hire some of the soon-to-be-jobless Atlantic City casino workers. Maryland Live! is holding job fairs next week at the Sheraton hotel across from the Atlantic City Convention Center. The Hanover, Maryland casino held a similar recruitment effort in January when The Atlantic Club shut down.
    A Maryland casino is looking to hire some of the soon-to-be-jobless Atlantic City casino workers. Maryland Live! is holding job fairs next week at the Sheraton hotel across from the Atlantic City Convention Center. The Hanover, Maryland casino held a similar recruitment effort in January when The Atlantic Club shut down.
Powered by WorldNow

KDFW FOX 4
400 N. Griffin Street
Dallas, Texas 75202

Main Station Directory:
(214) 720-4444
News Fax:
(214) 720-3263 or (214) 720-3333

Didn't find what you were looking for?
All content © Copyright 2000 - 2014 Fox Television Stations, Inc. and Worldnow. All Rights Reserved.
Privacy Policy | Terms of Service | Ad Choices